Wednesday 22 November 2017

Cowen set to pledge €250m as Ireland's share of Brussels bailout for Greece

Taoiseach Brian Cowen talks with Greek Prime Minister George Papandreou at the summit. Photo: Getty Images
Taoiseach Brian Cowen talks with Greek Prime Minister George Papandreou at the summit. Photo: Getty Images
(1st row L-R) Cypriot President Demetris Christofias, Romanian President Traian Basescu, European Parliament President Jerzy Buzek (2nd row L-R) Latvian Prime Minister Valdis Dombrovskis, Italian Prime Minister Silvio Berlusconi, Greek Prime Minister George A. Papandreou, Irish Prime Minister Brian Cowen pose for a familly photo of a European Union summit at the European Council headquarters on March 25, 2010 in Brussels. Photo: Getty Images
Fionnan Sheahan

Fionnan Sheahan

TAOISEACH Brian Cowen is set to pledge to loan anything up to €250m to Greece, as part of an EU financial bailout, despite the country's own budgetary difficulties.

The loans to the debt-ridden Greeks would be used only as a last resort, but might be paid over as soon as next month, if they were needed.

But Europe's heavyhitters are demanding an EU "economic government" to prevent a repeat of the debt crisis besetting the euro.

Germany and France want the creation of an "economic government of the European Union" with a greater role in "economic surveillance".

However, other countries are seeking to water down this contentious language to just "economic governance" as talk of an EU government would spark concerns about an erosion of sovereignty.

German Chancellor Angela Merkel also wants to toughen up the rules for euro membership.

Mr Cowen committed yesterday to supporting an EU deal agreed to assist the Greeks.

Ireland was also hailed as a model Greece should be following in restoring its economic credibility.

European Central Bank president Jean-Claude Trichet praised Ireland in the European Parliament as he said the Government acted with extreme determination and capacity.

"I don't want to elaborate more on Greece...Let me only say that Greece has a role model, and that is Ireland," he said.

"Ireland took very seriously its problems," he added.

Endorsement

This ringing endorsement of the Government's actions in reducing the budget deficit was warmly welcomed by Mr Cowen.

But the solution to the Greek economic problems, will be vastly different from the Government's programme of spending cutbacks and tax hikes.

Greece is grappling with a €300bn debt mountain and a budget deficit of 12.7pc - more than four times the EU's allowable 3pc limit.

EU leaders were on the brink last night of agreeing a series of loans to Greece from each of the Eurozone countries -- along with a further injection from the International Monetary Fund (IMF).

It is not clear how the Greek bailout will be divided up, but under one scenario being mentioned, the EU would loan €15bn to Greece, with another €10bn coming from the IMF.

Based on Ireland making up 1.64pc of ECB capital, this would put Ireland's contribution at €246m -- if €15bn was the final figure..

Despite the country's own economic difficulties, the Government would loan the money, but make a profit on the repayments by charging higher interest rates.

Government sources stressed there was a long way to go before this was agreed and, even if that point was reached, it was possible Ireland would not have to contribute.

But every Eurozone country will be expected to offer a loan to Greece and Mr Cowen insisted, if there was such an agreement, the principle the interest rate of the borrowing state would be less than the cost it is to loan would have to be adhered to.

"The cost to the lending state obviously would have to be covered. So if it were ever to arise, we are not in that position yet, because Greece, in fairness to them, as a sovereign state, we have to respect Greece's position, hasn't sought financial assistance. What it is seeking is a mechanism," he said

While Mr Juncker believes all Eurozone governments will have to participate in bilateral loans, the Taoiseach said that stage has not been reached.

"You're in a very sensitive position, where this hypothetical hasn't arisen. So when it arises, Ireland will discharge its responsibilities as a member state, as others will," he said.

The Government could end up lending money to Greece as part of a financial bailout, as Europe's heavy-hitters call for an "economic government" to co-ordinate economic policy.

Germany and France demanded the creation of an "economic government of the European Union" with a greater role in keeping an eye on EU member states, to prevent a repeat of the current economic crisis besetting the euro.

Taoiseach Brian Cowen committed yesterday to supporting an EU deal to assist the Greeks.

Ireland was also hailed as a model Greece should be following in restoring its economic credibility.

European Central Bank President Jean-Claude Trichet praised Ireland in the European Parliament as he said the Government acted with extreme determination and capacity.

"I don't want to elaborate more on Greece. . . Let me only say that Greece has a role model, and that is Ireland," he said. "Ireland took very seriously its problems," he added.

This ringing endorsement of the Government's actions in reducing the budget deficit was warmly welcomed by Mr Cowen.

But the solution to the Greek economic problems will be vastly different from the Government's programme of spending cutbacks and tax hikes.

Greece is grappling with a €300bn debt and a budget deficit of 12.7pc -- more than four times the EU's 3pc limit.

EU leaders were on the brink last night of agreeing an €23bn package for Greece.

Difficulties

France and Germany reached a deal on a financing, but only with significant help from the International Monetary Fund.

It is not clear how the Greek bailout will be divided up. But a possible scenario is of the European Central Bank setting up a central fund, into which all the eurozone countries would contribute loans.

Despite the country's own economic difficulties, the Government would lend the money, possibly as much tens of millions of euro, but make a profit on the repayments by charging a premium.

Government sources stressed there was a long way to go before this was agreed and, even if that point was reached, it was possible Ireland would not have to contribute.

Mr Cowen said: "The cost to the lending state obviously would have to be covered."

While European Council president Jean-Claude Juncker believes all eurozone governments will have to participate in bilateral loans, Mr Cowen said that stage has not been reached.

The controversial proposal to make the European Council, headed by EU President Herman Van Rompuy, an "economic government" is contained in a document prepared by the Germans and the French.

"We commit to promote a strong co-ordination of economic polices in Europe. We consider that the European Council should become the economic government of the EU and we propose to increase its role in economic surveillance and the definition of the EU growth strategy," the draft document says.

However, some other countries are expected to baulk at the prospect of their national economic sovereignty being overtaken by the EU.

Irish Independent

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