Cowen insists EU and IMF package essential for Ireland
Published 29/11/2010 | 05:00
TAOISEACH Brian Cowen last night insisted the bailout deal struck with the EU and IMF is essential for Ireland.
Mr Cowen said the Government had considered "all available policy options" -- including burning subordinated bank bondholders -- when striking a deal with negotiators over the past week and half.
He added Ireland "was not an irresponsible country" and that he had not considered a debt default.
"We are a country that recognises its international obligations as a member of the euro area," Mr Cowen said.
The deal will see €85bn provided from the EU, IMF, the National Pensions Reserve Fund (NPRF), as well as bilateral loans from the UK, Denmark and Sweden with an annual interest rate of 5.8pc.
A total of €17.5bn will come from the NPRF and other domestic cash funds, with the rest coming from the external sources.
Mr Cowen also said Ireland could not do without the bailout if public services were to be maintained and claimed even more drastic tax increases and cuts than already outlined in the four-year plan would have been imposed if the bailout had not been accepted.
They also would have been imposed in a quicker timeframe, he said.
"Those negotiations and the agreed programme have been informed by the most important consideration of our national interest and the broader interests of the eurozone," Mr Cowen said.
He also said the corporation tax rate of 12.5pc had been maintained and added that the target of bringing the deficit down to 3pc of GDP by 2014 could be extended by a year if growth was slower than expected and debt interest payments increased.
He said that by 2013, the debt interest repayments would be at 23c in the euro, levels last seen in 1992 or 1993.
He said there wasn't "political or institutional support within Europe" for making senior bondholders pay because it would affect European banks and the financial system. Mr Cowen claimed the bailout allowed Ireland breathing space to sort out its affairs.
He also said the money would not be drawn down in one go, and that the plan would lead to a restructuring of the Irish banking system.
"This will lead to a smaller banking system, more proportionate to the size of the economy, capitalised to the highest international standards, with renewed access to normal market sources of funding and focus on strongly supporting the recovery of the economy," Mr Cowen added.
Kevin Cardiff, secretary general of the Department of Finance, said the State may not be fully reliant on the programme over the three years and may enter the bond markets if the conditions are right to do so.