Taoiseach Brian Cowen today denied Opposition claims that Ireland would be charged a punitive rate of interest on the European Union component of the €85 million bailout package.
During Leaders' Questions, Labour Party leader Eamon Gilmore said Europe would be borrowing the money using its triple-A rating and lending it to Ireland at 3 percentage points higher, allowing it to make a profit of 3 per cent.
Mr Gilmore said that if the entire €22.5 billion amount from that fund was drawn down, the cost to Ireland of the additional interest would be "something close to €5,000 million over the lifetime of the loan.
He said when Latvia, Hungary and Romania got money through the European Union, such a margin had not been applied to the interest they were charged. Mr Gilmore asked why there was no such precedent and why the Government had agreed to such a rate of interest being applied.
Mr Cowen said the reason there was no precedent was that Ireland was the first country to utilise funds under this EFSM finance mechanism and it was the first time the money has been provided for such a purpose.
He said the situation in Greece, which predated a decision in May by EU finance ministers on how the money would be disbursed, was a bilateral loan arrangement between countries which was at rates "similar" to what Ireland would pay.
Mr Cowen said the "general provision on lending in a last-resort situation" was based on that decision of Ecofin in May. "It applies to this loan and it will apply to any future loans as well, should that arise for any other country," he said.
It was calculated in such a way that it did act as an assistance to Ireland. But given that the IMF was recognised as the cheapest international provider of credit, the EFSM money at 5.7 per cent was "at the same rate as the IMF monies available".
Mr Gilmore responded that it was not the first time that monies had been made available to countries through various EU mechanisms. The provision in the EU treaties was that such monies could be made available "in a spirit of solidarity", he said.
But Ireland was the first country borrowing money that was being charged a "penalty rate of interest".
In a statement today, the European Commission denied there were any "abusive charges" on financial aid to Ireland, and said the 3 per cent charge had been agreed by member states.