Kenny urges EU to cut interest rate on bailout
Published 28/01/2011 | 05:00
FINE Gael leader Enda Kenny will today protest about the "penal interest rate" on our bailout funds when he meets European Commission President Jose Manuel Barroso
He is flying to Brussels with his finance spokesman Michael Noonan, who has warned that the country may not be able to afford to pay back the bailout loans unless the interest rate is cut and new terms are negotiated with some senior bank bondholders.
There is a growing international consensus that it may be possible to reduce the EU interest rate of 6pc on our bailout funds, which is around 3pc higher than the market rate to borrow such money.
Mr Kenny and Mr Noonan are due to meet Mr Barroso in the Berlaymont building -- headquarters of the European Commission -- at 5pm Irish time.
A Fine Gael spokesman said both sides had agreed it would be "mutually beneficial" to have a meeting. Fine Gael is hoping that Mr Kenny will be returning to Brussels after the general election to negotiate as Taoiseach.
In the Dail yesterday, Finance Minister Brian Lenihan said he was "optimistic" that real progress could be made on changing the interest rate on the bailout package in the coming months.
"The case needs to be made and it will require considerable diplomatic activity because it will require the agreement of the other (EU) member states," he said.
The €85bn bailout package is made up of €17.5bn from our own pension reserve fund, €17.7bn from the newly created European financial stability facility, €22.5bn from a separate EU bailout fund and €22.5bn from the International Monetary Fund (IMF).
Mr Lenihan said there would be a summit of EU leaders on February 4, where the question of reducing the higher interest rate on the EU part of the bailout would be discussed.
"The debate will continue at the February meeting, which clearly will take place during the general election campaign and which I will need to attend because of the vital national interest involved," Mr Lenihan said.
Labour's Joan Burton said the country had got a "poor deal" from the IMF-EU bailout, particularly from the "3pc penalty points" on the European portion.
"If the country is to be able to meet the burden it is essential that they are renegotiated, reopened and reconsidered, which will require considerable diplomatic finesse and effort," she said.
However, Mr Lenihan warned there was "considerable resistance" in Europe to any move by the State to pay less of the debts owed to senior bondholders in the guaranteed banks.
"Ireland is not seen as being the same as Greece; it is seen as comparatively wealthy country that should not be allowed to default on its obligations," he said.
Meanwhile, a well-placed EU official has said that Ireland will not get "a single euro" from the EU if a future Fine Gael/Labour coalition goes ahead with a plan to burn senior bondholders.
Speaking to the Irish Independent yesterday, the source said that debt restructuring and default were "not an option" for the bloc, which has pumped hundreds of billions of euros into the public purse precisely to avoid that fate.
"It's not compatible with what we are doing," the official said.
Mr Noonan had suggested negotiating with investors holding up to €15bn of Irish bank debt not covered by the 2008 guarantee.
The EU has pumped well over €100bn into Irish banks.
While EU officials are discussing different ways to give its main €440bn rescue fund more firepower -- including beefing up the guarantees or offering pre-emptive credit lines -- debt restructuring is not being considered, several sources insist.