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Spain deal may cut bailout rates

THE Government is still pinning hopes on Spain winning a concession from the EU on its bailout interest rates so that it can follow suit.

Eurozone leaders' decision to grant Spain up to €100bn in funding for its banks without a full-scale rescue has angered the Opposition, who say the Government has been outmanoeuvred.

While Spain will join Greece, Ireland and Portugal in receiving a European financial package, the aid will be focused only on its banking sector and does not appear to have committed Spain to additional austerity measures or structural reform.

Ireland will shell out €1bn in interest on money borrowed to bail out the banks. This money is added on to Ireland's deficit.

Finance Minister Michael Noonan will support his Spanish colleague when he seeks this concession over the next two weeks.

Ireland is hoping to cut its deficit by moving the interest paid on its bailout off the Government books if Spain succeeds in winning the concession.

Taoiseach Enda Kenny has pointed out that Ireland already has some advantages over Spain, including having until 2015 to cut its budget deficit to 3pc, a year longer Spain.

Europe Minister Lucinda Creighton said that if Spain is offered interest rates and repayment periods that are more beneficial than those offered to Ireland, Dublin would seek and expect "parity and equivalent treatment".

Meanwhile, the Finance Department has confirmed the UK has lowered the interest rate on its bilateral €3.5bn loan to Ireland.