Merkel backs plans to fund SMEs here with cheap loans
Talks are advancing on a plan -- backed by German Chancellor Angela Merkel -- to give small businesses access to cheap loans from Germany at half the rate of interest being charged in Ireland.
On foot of the exit from the bailout, the German Chancellor has instructed her state investment bank to work closely with the Irish authorities to improve funding for the economy, including access to finance for small and medium-sized businesses.
The development is expected to give businesses loans at the German rate of 2pc, rather than the Irish rate of 4.25pc.
Taoiseach Enda Kenny has revealed officials from German Bank KFW were in Dublin this week to meet with the Department of Finance to discuss the implementation of the plan.
"We expect to be able to put together a structure and a facility with KFW for assisting small and medium enterprises in terms of access to credit here," he said, continuing: "So for instance, you know, a small and medium enterprise that would look for a loan of a half a million at Irish rates would be about 4.25pc, at German rates that would be 2pc.
He said this is "a very serious difference between the two", adding that this "means jobs, the retention of jobs and the creation of jobs".
Mr Kenny says the Government needs to "put pressure on the banks", as he mentioned in his state of the nation address on Sunday night.
He said: "We expect the vast majority of families in mortgage arrears to have received offers of a sustainable solution from banks. Repossession should only be a last resort in so far as the Government are concerned.
"And as banks return to profitability in 2014, further disposal of the State's investments in the banks will become possible," he said.
The cheap loans deal came about following talks between Mr Kenny and Chancellor Merkel ahead of the bailout exit about ways to support the economy.
The money comes at a cheaper rate because KFW is a triple-A rated bank, so it can borrow money more cheaply and pass this to its customers.
The loans will be funnelled through the National Treasury Management Agency and the new Strategic Investment Fund or the state-owned banks, AIB and Permanent TSB.
Ms Merkel personally pledged to work closely with Ireland to improve funding mechanisms.
The meeting this week follows the Chancellor's instruction that KFW should work with the Irish authorities "swiftly, in order to deliver on this initiative at the earliest possible date".