Ireland gets more time to pay EU loans and rate cut
Ireland will get a cut in EU loan interest rates and twice as much time to pay its debts as part of a plan to save the euro and Greece.
At an emergency eurozone summit in Brussels, leaders also agreed on a second bailout for Greece that will include cost-sharing with banks, backed by collateral and guarantees.
According to a draft communique drawn up by eurozone leaders in Brussels today, bailout interest rates will drop to around 3.5pc and loan maturities will double, giving Ireland 15 years to pay back its debts.
Ireland currently pays an average of 5.8pc on €45 billion of EU loans, which are offered on average over 7.5 years.
The concessions are being given on condition that the Government “participates constructively” in talks on a common corporate tax base - an EU-wide formula for redistributing taxes on business profits - and on other EU tax policies.
The discounts offered to Ireland mirror those agreed for Greece, which is struggling under a massive €350bn debt mountain.
The changes will also apply to Portugal.
Interest charged on eurozone rescue loans will now be equal to that charged to non-eurozone countries who borrow money from the European Commission.
Latvia, Romania and Hungary have so far tapped that fund, which has a ceiling of EUR50 billion.
Interest rates will not fall below the eurozone fund’s borrowing costs. That fund, the European Financial Stability Facility (EFSF), was able to tap the markets at the end of June at a rate of around 2.8pc.
That was before the European Central Bank raised its rate by 25 basis points in July.
Greece is being offered a second bailout - the final amount still to be decided - at lower interest rates and extended loan maturities.
The EU portion is to be matched by IMF funding, and coupled with a European “Marshall Plan” to help boost growth and investment in the country.
The EU has already promised to speed up the payment of €1bn in infrastructural aid, and announced this week that it was sending a technical team to Athens to help the government absorb the cash.
The new loans will be backed by “collateral arrangements where appropriate”, the communique says, after Finland insisted that it receive assurances for any extra money it is expected to stump up as part of the EFSF.
Private investors will be offered a “menu of options” to encourage them to participate in the bailout, including bond exchanges, rollovers and buybacks.
Their participation will be “voluntary”, the communique says, although ratings agencies have already indicated that they will declare Greece in partial default of its debts if the plans go ahead.
Eurozone governments will have to back bondholder involvement, possibly through a special fund guaranteed by the AAA-rated financial stability facility.
“Greece is in a uniquely grave situation in the euro area,” the draft says. “This is the reason why it requires an exceptional solution.”
The meeting in Brussels was attended by all 17 eurozone leaders, IMF head Christine Lagarde, ECB chief Jean-Claude Trichet, and a representative from the Institute of International Finance, which represents the global banking groups exposed to Greek debt.
Earlier Taoiseach Enda Kenny had called on leaders to be flexible with its plans.
European markets warmed to the news and many shares erased earlier losses on the news of a new deal.
The euro gained 0.5pc against the dollar.