THE EXECUTIVE board of the International Monetary Fund (IMF) yesterday approved a three-year Extended Fund Facility loan for Ireland, totalling €22.5 billion. The vote had been delayed one week in deference to Wednesday’s vote in Dáil Éireann.
The loan was approved under “fast-track emergency financing mechanism procedures”, said a statement from the IMF. Some €5.8 billion will be made available to Ireland immediately.
Dominique Strauss-Kahn, the managing director and chairman of the board of the IMF, said: “The Irish authorities have designed an ambitious policy package to address the economic crisis facing the nation.”
Without such a “multi-year programme targeting vulnerabilities in the banking system” there could be “no enduring solution to the crisis”.
Mr Strauss-Kahn said authorities had “designed a programme with fairness in mind so the burden of economic and financial adjustment is shared across all levels of society, with the most vulnerable groups the most protected”.
The loan from the IMF is part of an overall package totalling €85 billion. The European Union will provide €45 billion from the European Financial Stabilisation Mechanism and the European Financial Stability Facility. Britain, Sweden and Denmark have agreed to bi-lateral loans, and the Irish Government will contribute €17.5 billion from its own cash reserves and liquid assets.
In a separate interview yesterday Mr Strauss-Kahn said he believed Spain would avoid Ireland’s fate and said there is no threat to the euro currency’s existence.
“I don’t see that the risks for Spain will be that big in 2011,” he said. “It doesn’t mean there is no risk . . . but I’m not that pessimistic about the Spanish economy.”
Mr Strauss-Kahn said Europe needs to work swiftly on a co-ordinated response to deal with the debt crisis sweeping through nations on the periphery of the euro zone.
“I am worried and that’s why I am urging the Europeans . . . to provide a comprehensive solution because this piecemeal approach . . . obviously doesn’t work,” he said.
EU leaders yesterday began a two-day summit at which they are expected to approve changes to the EU’s governing treaty to allow the creation of a permanent mechanism for financial crises.
The IMF chief expressed confidence that the euro currency would survive the crisis and he said European institutions would emerge more resilient.
“It’s a strong currency which behaved during the last 10 years better than even the Deutschmark in the previous decade,” he said. “I see many reasons why there may be a problem in the euro zone in terms of growth, unemployment, even, beyond unemployment, social problems . . . but that doesn’t mean at all that I see any threat to the euro.”
“Any solution other than the euro would be worse for the euro zone members.”
He struck a positive note on Ireland’s future, saying the EU/IMF rescue will enable the nation to find its way back to economic health. “It’s going to work but of course it’s difficult,” he said.
Mr Strauss-Kahn said the economic recovery from the 2007-2009 financial crisis is not yet secured, with growth at a sluggish pace in Europe and an uncertain outlook in the US. However, he said he did not see a risk of the US slipping back into a recession.
