Video: Our €800m debt saving deal
- Lower interest rate will slash repayments
- We have longer to pay back bailout loans
- Corporation tax left alone as euro rescued
Published 22/07/2011 | 05:00
IRELAND's massive debt burden was substantially eased as EU leaders agreed sweeping new plans to save the euro.
The historic deal means our bailout repayments will be cut by as much as €800m a year.
And the Government will be given a much longer period of up to 30 years to pay back our EU/IMF debt.
Significantly, the major concessions were won without having to give up our low rate of corporation tax.
Under the deal, the rate of interest Ireland has to pay on the bailout has been cut by 2pc to 3.5pc, saving the cash-strapped Exchequer between €600m and €800m in repayments every year.
Emerging from 10 hours of tense negotiations at the summit in Brussels, Taoiseach Enda Kenny said Ireland achieved a "substantial interest rate reduction", fulfilling the Government's pre-election promise.
"Tonight Ireland's burden has been eased. We have a long way to go, we still have a massive budget deficit to bridge. But for now this was a good day for Ireland," Mr Kenny said.
Ireland -- along with Portugal and Greece -- were the big winners of the radical new overhaul of the EU bailout fund.
The draft deal will, for the first time, give the eurozone countries the chance to stand on their own feet.
Ireland for the first time will also be accessing bailout funds at the same rates as Greece and Portugal.
Markets cheered the news, with stocks, bonds and the euro rallying sharply on hopes the deal in Brussels will prove a turning point in the 18 month-long debt crisis.
The euro and European stocks, which had fallen on reports of a possible selective default, rallied sharply on news of the draft conclusions.
The euro topped US$1.44 after details of the draft agreement were leaked.
The savings for Ireland will flow from December, but Mr Kenny made it clear the austerity planned for December's Budget would still happen.
Ireland could also get a further benefit if the European Financial Stability Fund -- the EFSF-- decides in future years to buy Ireland's bonds on the open market at a discounted price, bringing down Ireland's debt.
However, the Government said this was not on the immediate agenda.
Ireland had been looking for a reduction in bailout loan interest rates from late last year, but opposition from key eurozone players such as France and Germany held it up.
Mr Kenny and French President Nicolas Sarkozy had a so-called "Gallic spat" at a previous meeting in Brussels.
However, referring to previous differences, Mr Kenny insisted: "It's over."
Support from Germany was also key in securing the new deal.
Mr Kenny said that the Government had sought to "re-build'' relationships after the last administration left office in March.
"No conditions are attached to the interest rate reduction,'' the Taoiseach claimed.
The agreement does commit Ireland to study a new European corporation tax system known as the Common Consolidated Corporation Tax Base.
However, Mr Kenny said he was still opposed to this system.
The breakthrough came followed a frantic day of shuttle diplomacy, when rumours were rife in Brussels about the kind of package that would emerge.
European governments and the IMF will put €109bn into the package, with private institutions due to give €49.6bn through a mixture of contributions and debt buy-backs.
At one point proposals to tax banks all over Europe to help Greece was mooted, but this proposal later went off the table.
As for Greece itself, the agreement gives the debt ravaged country a second bailout, although the private sector will be playing a part, although the details on this were sketchy last night.
Banks will agree to rollover certain Greek debts in a "menu of options'' to be fleshed out over the next few days and weeks.
Greece will also get its loans stretched out over a long period, of up to 30 years.
The EFSF will also get new powers, including the power to capitalise banks and buy back bonds in the secondary market.
The president of the European Council, Herman Van Rompuy, said: "Reform of the EFSF will make it more flexible and effective. We do not now have to wait for substantial damage to occur before we can intervene."
The details of how this might work were not disclosed last night.
The credit ratings agencies will also be reformed and the EU may set up its own agency.