BAILOUT FUNDS:EUROPEAN UNION officials have confirmed that Ireland will benefit from lower interest rates on all future EU-IMF loans.
A senior EU official indicated yesterday that, as well as European Financial Stability Facility (EFSF) loans, interest rates would be reduced too on credit from the lesser-known European Financial Stabilisation Mechanism (EFSM).
This is a €60 billion “community” lending instrument backed by the EU budget, from which Ireland has borrowed €22.5 billion.
“On the EFSM interest rate [and] if it will be reduced or not: there has been no decision by the summit on this, but my personal expectation is that that will be the case as well,” the official said on condition of anonymity.
The final statement from leaders on Thursday mentioned only rate cuts on loans from the EFSF fund, from which Ireland has borrowed €17.7 billion as part of an €85 billion EU-IMF bailout agreed late last year.
EU economic commissioner Olli Rehn said yesterday the deal made Ireland’s debt more sustainable. “The reduced EFSF lending rates and lengthened maturities for Greece will be applied also for Portugal and Ireland, thereby strengthening their adjustment programmes considerably,” he said in a statement yesterday.
“This will also, of course, improve their debt sustainability.”
Finance ministers and lawyers now have to translate Thursday’s political deal into a legal text.
“What still remains to be done [is] to translate and implement what was agreed,” said European commission spokeswoman Pia Ahrenkilde Hansen.
The package was given a broad welcome by all euro zone leaders yesterday. Greece’s finance minister Evangelos Venizelos said the deal would provide “great relief for the Greek economy”.
Dutch prime minister Mark Rutte said it was ambitious enough to prevent a spread of contagion to other euro zone members. “It is about Greece but it is also about building a walkway between Greece and other countries,” he said. “I think the financial markets will see that the package of measures is complete and will make sure the trouble facing Greece does not spread.”
Spanish prime minister José Luis Rodríguez Zapatero said the pact should “generate confidence and stability in the markets”.
European Central Bank chief economist Prof Jürgen Stark denied the euro zone deal had weakened the Frankfurt institute.