MINISTER FOR Finance Michael Noonan wants an agreement to cut the interest rate on Ireland’s bailout loans before he draws down money for the next recapitalisation of the banks – but he insisted last night that he is not under a “tight deadline” to strike a deal.
With preparations for an €80 billion bailout of Portugal dominating a two-day meeting of EU finance ministers near Budapest, Mr Noonan gave no sign of any substantive progress in the Government’s campaign to secure a lower interest charge.
“I’m building up relationships and, as relationships build up, a better understanding emerges of what our vital interests are. The corporate tax rate and its preservation is a vital interest for Ireland,” he told reporters. “There are some outstanding matters of concern to some countries, principally the French and the Germans.”
As he presses his French and German counterparts to withdraw their demand for a dilution of Ireland’s corporate tax regime in return for a rate cut, Mr Noonan said “everybody is well aware” that the Government is not for turning on that question. He was willing to “explore alternatives”, but wouldn’t specify any.
With the Financial Regulator expected in the coming weeks to set out a timetable for the next €24 billion capital infusion into the banks, the Minister said he wanted the interest rate question settled before such transactions.
“Before we draw down serious tranches of money to recapitalise the banks and before the interest rate accrues from those draw-downs, it would be important to have this finalised,” he said. However, Mr Noonan played down pressure for a rate reduction as “you don’t owe interest the day you draw down money”.
He also expects Ireland to benefit from a decision at yesterday’s meeting to cut Greece’s future interest payments on bailout loans it has already drawn down. “I presume the same will apply to Ireland.”
This gives the Government some leeway as the interest coupon payments on the bailout loans already received are not due until November and December. However, sources said they believed the interest rate question needed to be settled by June, when EU governments take legal steps to enlarge the lending capacity of their bailout fund.
Mr Noonan said he had a “good conversation” yesterday with German minister Wolfgang Schäuble but insisted he was not negotiating with him. “I’m new around here and I’m trying to build up the connections that Ireland traditionally had with our European partners and I think we’re doing that reasonably successfully.
“We had a chat about Portugal and we had a chat about the importance of an interest rate reduction in Ireland to ensure that the overall price of the bailout was less expensive and he understood that point.”
Mr Noonan was scheduled to meet French minister Christine Lagarde privately last night. France is the most strident opponent of Ireland’s 12.5 per cent corporate tax rate.
Questioned about the French stance before the meeting, Ms Lagarde said she expected “nice discussions” with Mr Noonan and that “various items” would be discussed.
Luxembourg’s prime minister Jean-Claude Juncker, who chairs meetings of euro area finance ministers, said the Irish question did not feature during talks yesterday. Bailout talks with Portugal are complicated by an election on June 5th, but EU ministers want to conclude a rescue deal by their next scheduled meeting on May 16th.
They called on “all political parties” in Portugal to agree a policy adjustment programme before then, which requires them to set aside differences in the middle of a campaign.
The ministers said austerity measures rejected last month by the Portuguese parliament were the starting point, but they want deeper cuts.
EU economics commissioner Olli Rehn said European officials were confident that Lisbon could manage its funding needs this month and next, but that June, when some €4.9 billion in bond redemptions are due, would be “more challenging”.
