Sunday 17 February 2019

EU deal set to postpone our €40bn bailout debt for 15 years

Finance Minister Michael Noonan
Finance Minister Michael Noonan

Peter Flanagan Brussels

A NEW deal on Ireland's multi-billion euro debt to the European Union could be struck as soon as today – reducing the pressure for harsh budgets in the years ahead.

European finance ministers will decide today whether to allow Ireland to delay repayment of the money loaned to the country under the bailout by as much as 15 years.

Government sources are cautiously optimistic on the proposal, saying progress has been made but there were "no final decisions yet".

Eurozone finance ministers will consider extending the repayment schedule of the EU rescue loans to both Ireland and Portugal.

The aim is to push out the repayment dates on the emergency loans that Europe gave Ireland as part of its rescue package in 2010.

Dutch Finance Minister Jeroen Dijsselbloem, who heads the group of Eurozone finance ministers, revealed that just such a plan for both Ireland and Portugal will be discussed this morning.

If ministers agree to allow the repayment dates to be extended, it could dramatically reduce the amount of money the Government will have to raise over the next decade.

And it would be another major boost in the bid to emerge from the bailout at the end of this year.

It would be a major coup for the Government and Finance Minister Michael Noonan, coming just weeks after the deal struck on the promissory note debt.

The new proposals deal with a separate tranche of debt – when the country sought an international bailout in 2010, the EU agreed to lend us €40.2bn.

About €16bn of this sum is due to be repaid between 2015 and 2020.

If the repayment date on those loans can be pushed out further, it will save the Government billions in the short term.

And although all the money will still have to be repaid, doing so at a later date means that inflation is on the Government's side – as the loans will be worth less in real terms when the time comes to settle the debt.

If there is an agreement among finance ministers, then the troika of the EU, International Monetary Fund and European Central Bank will be charged with working out the details of the plan.

That will then be presented at a meeting of finance ministers next month in Dublin.

"We intend to discuss the principle of extending the maturities for Ireland and Portugal and if agreement is reached then ask for technical work to be done as quickly as possible," Mr Dijsselbloem said.

"If there was an agreement then we would approach the troika to come up with the best way to deal with extending the maturity on loans," he added.

Department of Finance sources emphasised that a deal had not been agreed yet and it would be 2015 before any benefits are realised.

Earlier in the day, Mr Noonan had said he would be lobbying for an extension on the sidelines of the monthly meeting, to "see where it stands" as regards getting an agreement.

The plan would not see any overall saving for the country, but like last month's promissory note agreement it would ease the financial burden on the State from 2015 onwards.

While light in detail, it could mean stretching the loan period by as much as 15 years.

The State is scheduled to repay €6.3bn of EU bailout funds in 2015, with another €4.2bn set to be paid back a year later. Combined with normal government bonds that are set to mature in those years, the country would have to pay back just under €30bn over those two years to the likes if the IMF, EU and international investors.

Most analysts consider that burden to be too great if the State is to successfully exit its bailout programme by the end of this year.

Getting Ireland successfully out of its bailout programme is seen as vital for the EU politically – which is giving the Government some leverage.

It will allow Brussels to show that the bailout programmes "work" despite criticism that they force austerity at the expense of economic growth.

Irish Independent

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