Ireland has won the backing of the euro group of euro zone finance ministers for its bid to repay the IMF portion of its bailout loans early.
At a meeting this morning, the 18-strong euro group gave political agreement to the move. Minister for Finance Michael Noonan now must seek the support of all 28 EU members tomorrow at the ecofin meeting in Milan. "We've had a successful morning [..]they have agreed unanimously to open procedures in accordance with their national requirements," Mr Noonan said following the meeting. "The most significant way of putting it is that we've cleared the first hurdle, and we have a lot of reason to expect that we will clear the hurdle tomorrow. "
Ireland has been seeking to refinance its IMF loans with cheaper market funding, but the move needs the backing of the country’s other main creditors.
Ministers also agreed that no further eurogroup meeting will be necessary to finalise the agreement. Instead officials in Brussels will work on the legal changes necessitated by the agreement to restructure the IMF loans.
The minister said that ECB president Mario Draghi had told the group of finance ministers that the bank had "taken note" of Ireland's IMF repayment plan, and praised Ireland's progress in improving the economy. He also said that the ECB had concerns about the promissory note deal, but that was a separate issue.
Speaking after the meeting, ECB president Mario Draghi reiterated this view, stating that there was a "separate discussion on how to handle the legacy of the IBRC in a way that shouldn't rise monetary financing concerns on our side." The ECB is concerned at the pace at which the Irish central bank is offloading the long-term bonds which replaced the IBRC promissory notes last year. Minister Noonan said he expects the Irish central bank governor Patrick Honohan to discuss the issue with ECB officials and Mr Draghi over the next few months, noting that Ireland had already accelerated the profile of some sales.
Mr Noonan also discussed the issue with German finance minister Wolfgang Schauble, who was supportive. The issue will now come before the German Parliament on October 10th.
The Government aims to save up to €400 million per year through the loan restructuring. While Minister Noonan said the impact of the savings on the exchequer would depend on the timing of the sale of the bonds by the Central Bank, it would have some effect on next month’s budget.
“It will have some affect on the Irish budget, we will probably include a prudent and modest figure for additional savings in the NTMA in the budget figures, “ he said.
Klaus Regling, the head of the ESM fund which manages Ireland's EFSF loans also welcomed the decision, pointing out that early repayment of the IMF loans would strengthen Ireland's debt sustainability and benefit other large creditors like the EFSF.
Earlier this week the IMF's Craig Beaumont told The Irish Times that the IMF will accept early repayments from Ireland "without conditionality or charges ," noting that other European countries including Hungary, Iceland and Latvia have made early repayments in recent years.
“ In Ireland’s case, early repayments to the IMF have the potential to improve the sustainability of its still high public debt,” Mr Beaumont said.
