Ireland to borrow from EU at same rate as Greece
Published 23/11/2010 | 11:51
The Government will pay about the same interest rate on emergency loans from the European Union as Greece, Dutch Finance Minister Jan Kees de Jager said.
“We agreed that it will take place at about the same conditions and pricing as with Greece,” De Jager said in an interview at the ministry in The Hague yesterday. Ireland will have to pay interest of “about” 5pc on the emergency loans, he said.
The Government on November 21 applied for a bailout from the EU’s European Financial Stability Facility and the International Monetary Fund to help fund itself and save its banks, becoming the second euro member to seek a rescue after Greece.
European officials are assessing how much financing Ireland needs and for how long, and De Jager said that after three years, Ireland will have to pay an extra percentage point in interest costs.
“This is the first country that calls upon the EFSF mechanism, of course I can’t rule out that another country will make use of it because it wasn’t created without a reason,” De Jager said.
“We are prepared to assist financially through the EFSF,” and “if we hadn’t done this, a very dark scenario could have developed in the euro zone.”
The EFSF was created this year to halt the spread of the Greek debt crisis and EU authorities pushed Ireland to seek aid after its borrowing costs soared to a record.
Investors may turn their focus from Ireland to the high budget-deficit nations of southern Europe, led by Portugal.
The extra yield demanded to hold Portuguese 10-year debt rather than German bunds rose 12 basis points to 419 basis points today. The Spanish yield spread rose 8 basis points to 217.
“The EFSF is ready and can be activated, so I expect that if another country runs into trouble and requests assistance, we’ll be able to act very quickly,” De Jager said. The Dutch parliament won’t have to approve the Irish aid, he said.
The European aid mechanism is part of a €750bn package, which includes €60bn from the European Commission -- the EU’s executive arm -- and €250bn from the International Monetary Fund.