EU bailout boss warns Ireland would be worst hit by a Brexit

Klaus Regling, chief executive officer of the European Financial Stability Fund (EFSF). Photo: Bloomberg

Sarah Collins and Shona Murray

April 06 2016 02:30 AM

Ireland would be hurt more than any other Eurozone country by a UK exit from the EU, the head of the European bailout fund has said.

"For certain euro-area countries it would certainly be costly - particularly for Ireland," said Klaus Regling, head of the European Financial Stability Facility (EFSF), which financed a quarter of Ireland's 2010 bailout.

"Half of their exports go to the UK, so for them it would be particularly difficult," he said.

Mr Regling, who now heads the Eurozone's permanent bailout fund, said a so-called "Brexit" would mainly impact the UK but would be "politically very unfortunate" for the wider EU. "It would mainly have a negative impact on the UK," he said. "It would certainly also weaken, politically, the EU as a whole," he said.

If it happened, then negotiating the UK's exit would be time-consuming and may cause investor flight to continental Europe," he said.

The latest ORB poll for 'The Telegraph' shows the "Remain" pro-EU side barely ahead after its lead narrowed.

Klaus Regling was one of the authors of a 2011 report on the causes of Ireland's banking crisis. He described Ireland as one of the ESM's success stories, along with Portugal, Spain and Cyprus, which exited its bailout programme last week.

"If the EFSF was not created in 2010 it's very likely that countries like Greece, Ireland and Portugal would have been forced to leave the euro area," he said. Greece, the only Eurozone country still under a bailout programme, is in talks with creditors from the IMF and EU to receive a further tranche of aid in exchange for a series of pension, tax and spending reforms.

Mr Regling said he hoped to conclude talks by the end of April, a deadline he said was "possible but not guaranteed".

The IMF wants EU institutions to agree to take losses on the loans they have made to Greece over the course of three bailout programmes.

It also disagrees with the budget surplus target Greece has to meet this year, suggesting it should be lowered.

EU institutions, however, are against further debt write-downs, but may grant Greece more time to pay off loans and lower interest rates. Ireland, however may not see its bailout loan costs cut if that happens, Klaus Regling indicated.

"This crisis is coming to an end, Greece is the only pending case it would not be wise to change the current set-up," he said.

Meanwhile, the acting Minister for Foreign Affairs, Charlie Flanagan, believes there are "huge, adverse consequences for a UK withdrawal from Europe" and warned against "complacency" with less than 80 days to go before Britain votes on June 23.

He was in London for a bi-lateral meeting with UK Foreign Secretary Phillip Hammond, where he said he was delivering a "clear message from the Government" that Ireland's best interests are served by the UK remaining in the EU.

Mr Flanagan also met business leaders, including from the British Irish Chamber of Commerce which is urging its members to support a pro-EU stance in June.