THE GOVERNMENT has conceded it is seeking a smaller reduction in the interest rate of the EU-International Monetary Fund bailout package than the 1 per cent originally sought, and only on the remaining money it has yet to draw down.
In what the Opposition portrayed as a U-turn and a tacit acceptance that a cut is no longer achievable, Taoiseach Enda Kenny yesterday said the maximum savings the Government could achieve from an interest rate cut were €150 million per annum, compared to €400 million if the rate on the whole loan was cut from 5.8 per cent to 4.8 per cent.
Mr Kenny, speaking in the Dáil, based the reduced figure on the fact the interest rate reduction would not apply to the €15 billion in European loans already drawn down, and only to the €24.6 billion remaining.
Minister of State at the Department of Finance Brian Hayes also confirmed the Government was looking for a 0.6 per cent reduction during the negotiations with the EU and the European Central Bank.
But, in what was seen as a move to dampen expectations, Mr Kenny echoed the views of Minister for Finance Michael Noonan the previous day that Ireland was not prepared to negotiate an interest rate at the cost of the corporate tax rate.
He intimated the €150 million reduction achieved could not compensate for ceding any ground on the cornerstone of Ireland’s economic policy. Mr Kenny was referring to the French and German opposition to lowering the interest rate without Ireland changing its corporate tax code.
Mr Kenny said it was “unfair” some countries were seeking extra conditions to be imposed on Ireland in return for an interest rate cut. In an implied criticism of France, he said interest rate reduction that had been approved in principle by the European Council was being “allowed to drag because of national issues”. Mr Kenny also said he will bring up the issue of the interest rate at the European summit later this month. He said he would raise the matter of structuring the proposed European stability mechanism [due to commence from 2013] in a way that “will help counties to help themselves when it comes into effect . . .”
Fianna Fáil leader Micheál Martin said the issue of reducing the interest had been “hyped up” by the Taoiseach. He said Mr Noonan had tried to disguise the downgrading of a rates cut as a priority by the Government by attacking others. Sinn Féin deputy leader Mary Lou McDonald said 10 years after the bailout has run out “the Taoiseach will still be coming in here telling us that he will do the business on the interest rate”.
