IRELAND and Portugal should get seven more years to repay loans from the EU to facilitate their return to full market financing, a recommendation from international lenders to EU policy-makers says.
Such a move, if accepted, would mark a significant concession to Ireland, helping to seal its return to normal borrowing on markets as well as offering a significant boost to Portugal as it struggles to push through spending cuts.
Ireland and Portugal received emergency loans from the EU in 2010 and 2011 respectively after investors refused to lend to them at sustainable prices.
The average maturity on Ireland's EU loans stands at about 12 years. By extending the maturity, the payments are spread over a longer time, reducing the burden on the countries.
But Ireland will need to roll-over around €20bn a year in 2016-2020 while Portugal will need the same amount per year between 2015 and 2021, a paper prepared for junior EU finance ministers and central bankers said.
The paper was drafted by representatives of the European Central Bank, the European Commission, the International Monetary Fund – the troika – and the European Financial Stability Facility (EFSF).
It will be presented to EU ministers who meet in Dublin on Friday and Saturday to discuss the extensions.
Finance Minister Michael Noonan said in Limerick last weekend that no decision will be taken this weekend at the finance ministers' meeting.
Because the meeting is described as informal, the ministers are likely to give only political support for the extensions for both countries, with a formal decision to follow only later next month.
But while Ireland is likely to get full support, the backing for more time for Portugal is likely to be made conditional on Lisbon finding new measures to fill a €1.3bn gap in the 2013 budget following a ruling by Portugal's constitutional court that some of the earlier planned steps were illegal.
"That is the maximum one can expect," said one senior Eurozone official involved in the preparations for the meeting.
While much of the debt that falls due between 2015 and 2022 for Portugal and Ireland is privately owned, it also includes IMF and EU loans.
Data on websites of the EFSF and the EU bailout fund, ESFM, shows that redemptions of EU loans account for €8.6bn in 2016 for Ireland, and almost €7bn in 2016 and €8.7bn in 2021 for Portugal.
Dublin and Lisbon have therefore asked EU ministers to extend the average maturity of the loans by 15 years since the EU redemptions would have to be financed by market borrowing.
The paper considered extensions of two-and-a-half, five, seven and 10 years and more, rejecting the shorter extensions as not beneficial enough for the two countries.