Interest rate cut on cards but euro crisis deepens
Published 12/07/2011 | 11:18
Finance Minister Michael Noonan has welcomed news from Europe that Ireland is set to get a cut on our interest rate payment and more time to pay our debts off.
However, the good news comes as European Finance ministers meet in Brussels today to find a way to keep the euro area afloat as Greece desperately needs a second bailout and the cost of borrowing for Spain and Italy shot up.
Minister Noonan welcomed new flexibility from his fellow European ministers as a "significant advance" for Ireland which he stressed could lead to the country's debt burden being reduced and made more sustainable.
Mr Noonan said he would be “euphoric” if he looked at the situation only in an Irish context but had to be more cautious in his welcome because of problems in Greece and with the markets.
The fear this week that the current Greek mounting debt problems could draw countries like Italy into the crisis has forced countries into a major rethink on the best options to begin a recovery for the region.
The European Financial Stability Facility fund established to help troubled countries currently stands at €440bn and may have to be expanded, especially if Spain has to enter it.
And there are a number of other caveats attached to any changes to the plans.
The main questions are whether all 17 euro zone parliaments would need to pass changes and whether it would get the approval of the European Central Bank which is owed billions by European banks, including Irish ones.
"There's a sense of foreboding about the position in Italy and Spain. For one of the first meetings, Ireland and Portugal are no longer really central to the debate, it's now firmly fixed as a crisis in the euro zone rather than in the programme countries," Mr Noonan told RTE radio.
"But against that background we succeeded in achieving many policy objectives that we have been seeking for a long time.
"It's a breakthrough but the significance of the breakthrough will only be established when it's spelt out in the next month or so when the commission comes backs and puts specific policy proposals to the ministers."