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EU's Rehn: Ireland may not need special help to exit bailout


 EU Economics Commissioner Olli Rehn

EU Economics Commissioner Olli Rehn

EU Economics Commissioner Olli Rehn

THE European Commission is in discussions with Ireland and Spain on how to ensure a smooth exit from their bailouts in the next months, but both may succeed without any special arrangements, EU Economic and Monetary Affairs Commissioner Olli Rehn said.

Ireland's three-year, €67.5bn bailout from the euro zone and the International Monetary Fund, and the associated conditions on budgets and policy, is due to end on December 7.

Spain's programme, under which it borrowed €41bn to recapitalise its banks, expires at the end of 2013.

"We are currently holding discussions with both countries as well as within the Eurogroup, to see what is the best way to successfully exit the programme," Rehn told Reuters.

He said that reforms that both countries have pledged in exchange for the financial support were on track and the economies of both were growing stronger.

"The principle that it is better to be safe than sorry prevails and we will look into what are the best ways to ensure a successful exit from the programmes," Rehn said.

Officials here said in September that we would seek a €10bn precautionary credit line from the euro zone to insulate it against any market shocks when the bailout expires, but the country has so far not asked Brussels for such a programme.

"Thanks to the economic turnaround supported by the programmes in both countries they have a very good chance of exiting the programme successfully and returning to durable market funding," Rehn said.

"It is still premature to see if there is a need for any precautionary arrangement. I would not rule it out, but, as I said, both have a very good chance in succeeding even without a precautionary arrangement," he said.

European Union officials hope that Ireland may mark the beginning of the end of the euro zone's debt problems if it does draw a line under its funding worries next year.

Concerns about how Spain's economy will function in an era of tighter credit and more constrained housing markets continue to weigh on the prospects for its banks and government.

The IMF on Tuesday gave Ireland the green light to ease up on budget austerity in 2014 and predicted a solid 1.8pc economic expansion as well as a return to minimal growth in both Italy and Spain.

Some policy-makers in Brussels have said that Spain and Ireland would be wise to seek a new credit line, just in case.

Even if never used, it would enable the European Central Bank to include Ireland or Spain in its programme of government bond purchases, sending a powerful signal of confidence to markets.

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But such credit lines would also come with conditions and further close monitoring - limiting the choices in economic policy-making that governments accept only as a last resort.

Rehn said that it was far too early to discuss the arrangement for Portugal's exit from its bailout programme. Lisbon's financial lifeline from the eurozone will end in the middle of 2014.

He noted Portuguese exports and domestic demand were on the rise but said the country was still facing many challenges.

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