Business Irish

Saturday 16 December 2017

Juncker says Ireland to get interest rate cut 'very soon'

All bailed-out countries in line for reduction

Finance Minister
Michael Noonan
signing the treaty for
the European
Stability Mechanism
at the meeting in
Brussels yesterday
Finance Minister Michael Noonan signing the treaty for the European Stability Mechanism at the meeting in Brussels yesterday

Laura Noonan , in Brussels

BAILED-OUT countries including Ireland will get an interest rate cut, eurozone finance chiefs confirmed last night.

Plans to lower bailout interest rates and give countries longer to pay back debts will be brought forward "very very soon", Jean Claude Juncker, chairman of the Eurogroup of finance ministers, said in Brussels after a day of talks.

The comments, which were quickly welcomed by Irish officials, came as EU finance ministers agreed to draw up proposals that would "enhance" the EFSF bailout facilities tapped by Ireland, Greece and Portugal.

Pushed on the details of the proposed measures, Mr Juncker confirmed the lower interest rate would apply to all bailout countries including Ireland. "We are saying shortly and shortly means shortly," he said on the timeline.

But he declined to give any indication on the size of the planned cut.

In a statement, the Department of Finance in Dublin said it "welcomed" the fact that finance ministers were giving "consideration" to cutting the interest rate for bailout funds and enhancing the scope of the scheme.

"The wider the available measure, the better for Ireland and for Europe," the statement added.

The finance ministers promised a more flexible rescue fund in a bid to stop financial contagion engulfing Italy and Spain.

They also declined to rule out the possibility of a selective default by Greece to make its debt mountain more sustainable, despite the European Central Bank's fierce opposition, one participant said.

After talks following another day of turmoil on financial markets, ministers from the 17 countries that share the single currency vowed to safeguard stability in the euro area.

"Ministers stand ready to adopt further measures that will improve the euro area's systemic capacity to resist contagion risk, including enhancing the flexibility and the scope of the EFSF, lengthening the maturities of the loans and lowering the interest rates, including through a collateral arrangement where appropriate," they said in a statement.

Italian and Spanish stocks and bonds suffered another big selloff yesterday and the euro fell as investors rattled about an apparent deadlock in the EU on how to involve private bondholders in a second rescue package for Greece.

The Italian slide was triggered last week by concerns that Prime Minister Silvio Berlusconi was trying to undermine and perhaps remove Finance Minister Giulio Tremonti, seen as the guarantor of fiscal prudence in Rome.

Markets have been spooked by Italy's need for €900bn just to meet debt repayments over the next four years -- sending yields on Italian bonds to 5.74pc yesterday up from 4.62pc five weeks ago.

Italy, the third largest economy in the eurozone, has the second biggest per capita debt after Greece but has avoided the fate of Greece, Ireland and Portugal because it has a low budget deficit and a liquid bond market largely in domestic hands.

The ministers gave no indication that they had broken a stalemate over how to make banks, insurers and other funds share the cost of additional funding for Athens.

But one national official said they were moving closer to sharing the cost of easingGreece's debt burden with investors even if credit ratings agencies were to declare a selective default.

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