THE EUROPEAN Commission dismissed criticism of the cost of its €22.5 billion credit-line for Ireland as part of the EU-International Monetary Fund bailout, as Labour leader Éamon Gilmore claimed the Government allowed the State to be “ripped off” in the deal.
As the loan terms were criticised in the Dáil, Taoiseach Brian Cowen defended the loan agreement and said the commission was not acting as a lender of last resort when providing loans to other EU countries.
Controversy over the cost of the loan emerged after RTÉ reported that the interest rate charged to the Government, 5.7 per cent, was some 3 per cent greater than its own borrowing cost.
Responding to reports in the Irish media, spokesman for economics commissioner Olli Rehn acknowledged that interest rate included a 2.925 per cent “surcharge” over the rate at which the EU executive borrows, but said the Government itself signed up to such conditions when it backed the bailout scheme last summer.
“Member states – therefore including Ireland – agreed that terms and conditions of the loans should be equivalent to those of the IMF so as to ensure a prompt return to the markets,” he said.
“That is why there is this margin added to the borrowing cost which is a very preferential cost.”
Asked about claims that the rate charged to Ireland was at variance with the principle of solidarity set out in the Lisbon Treaty article under which the aid was granted, Mr Rehn’s spokesman said the rate was “clearly very preferential” when compared with the prevailing market rates for Irish 10-year bonds.
The rate on such bonds traded this week around 8.39 per cent.
“At the same time, we have to comply with decisions that were taken by member states in May 2010, meaning that we have to make this calculation which establishes all the provisions concerning how the loan grants have to be offered in terms of amounts, in terms of maturity . . . etc.”
Mr Gilmore described as a “penal” the rate of interest on the loans from the commission.
He added: “When Latvia, Hungary and Romania got money through the EU previously, a margin of that kind was not applied.”
Mr Cowen responded: “This is the first time this money has been provided for this purpose.”