We're still waiting on €10bn EU/IMF cut to interest rate
Published 16/10/2011 | 05:00
Ireland's much championed interest rate reduction, worth a potential €10bn on loans from our European masters, has yet to come into effect, Finance Minister Michael Noonan has conceded.
As a result, we are still subject to the higher interest rate four months on.
On July 21, European leaders announced changes to the European Financial Stability Facility (EFSF), including a reduction rate on loans to countries it lends to, in an attempt to stop the Greek crisis spreading into core European countries like Spain and Italy.
Ireland was the first country into the facility and was being charged at a margin of more than three per cent on top of the cost of providing the money.
But in a reply to a parliamentary question from Fianna Fail's finance spokesman Michael McGrath, Mr Noonan said that the benefit of the rate reduction can only come into effect once the measures are ratified by all eurozone member states.
"The amendment EFSF Framework Agreement, which enables the interest rate reductions, will take legal effect when all euro area member states have completed the ratification of the amendments. It will be applied to our EFSF loans once a revised loan agreement has been signed," Mr Noonan said in his reply to Mr McGrath.
Mr McGrath said it was highly disappointing that an interest rate reduction which had been much celebrated by the government hadn't actually come into effect, and said it showed a dangerous lack of urgency among European leaders.
"It highlights the slow cumbersome nature of how things work in Europe. The leaders agreed the cut, packed their bags and went off on holidays. It is very disappointing that the interest rate reduction still hasn't taken effect," Mr McGrath said.
On Thursday, Slovakia became the last member state to ratify the expansion plans and European leaders are to meet next week to advance further measures in order to solve the European debt crisis.
Slovakia's parliament ratified a plan to bolster the eurozone's EFSF rescue fund on Thursday, after voting to hold an early election as demanded by the opposition.
A junior party in the country's ruling coalition torpedoed the cabinet on Tuesday in a confidence motion connected with ratification of the plan to give the EFSF more powers to fight the debt crisis.
The failed attempt had rattled financial markets.
The opposition committed to provide votes for the EFSF in a repeated vote, once the early election plan was approved.
Slovakia was the only one of the 17 countries in the eurozone that had not approved giving the rescue fund more powers, a measure European leaders say is urgently needed to save the currency zone from financial ruin.
The difficulty ratifying the EFSF expansion in Slovakia is a sign of the challenges European leaders face responding to the debt crisis across 17 countries that must act unanimously.
Mr Noonan is still hoping to use Europe's new bailout fund to restructure the €29bn bailout of Anglo Irish Bank.
But Mr Noonan said it was "not clear yet" whether the ramped up EFSF fund would be "flexible enough" to be used for Anglo, even though Europe's leaders said "particularly good" progress had been made on enabling it to put capital into banks. The comments come almost a month after the minister first floated the idea of changing the terms of Anglo's bailout, which was initially done through a €29bn IOU dubbed a promissory note.
Under the deal, the Government will pay the bank €3bn a year over about 14 years, including €17bn of interest payable to the bank. Mr Noonan believes this is too much of a burden on the taxpayer and wants to restructure the arrangements.