If the State can borrow in the sovereign debt market at 2.26 per cent, it makes no financial sense to continue to repay IMF loans at over twice that – a 4.99 per cent interest rate. Particularly, if an alternative exists, whereby substantial savings may be achieved. The alternative is to refinance the IMF loans – on which the State pays €1 billion in annual interest – at the far lower market rate. The Government is exploring whether this option, which could cut the State’s annual interest bill significantly, can be exercised.

But first, the Government needs the agreement of other EU member states. Under the terms of the €64 billion bailout agreement with the troika of international lenders, an early loan repayment made to one lender – the IMF – must be made to all other lenders – the EU. The Government is exploring whether our European partners would agree to change the terms of the loan agreement and allow the State to repay the IMF alone. The initiative is set against the background of yet another blunt rejection of Ireland’s claims for retroactive direct bank recapitalisation for AIB and Bank of Ireland, under the European Stability Mechanism. Joachim Pfeiffer, a key figure in Germany’s ruling Christian Democrats, said last week there is “no chance” that this will happen.

Although the EU is clearly reluctant to contemplate recapitalising Irish banks, it should be more open to a Government request to allow it to refinance the State’s IMF loans. A lower annual interest bill would improve the sustainability of Irish public debt, and enhance Ireland’s credit rating – all of which should reassure EU lenders. However, the Government’s case could be weakened if in agreeing the 2015 budget, it is seen to take excessive risks with the public finances. Virtually all expert opinion (Central Bank, IMF, European Commission and the Irish Fiscal Advisory Council) now favours the Government making a €2 billion adjustment in tax and spending measures: advice the Government seems set to ignore – but at its peril.