European finance ministers reach agreement on Irish loans
Seven year extension of bailout a 'significant step' on full return to markets - Noonan
European Central Bank president Mario Draghi is welcomed by Minister for Finance Michael Noonan at the opening the Ecofin meeting in Dublin Castle this morning. Photograph: David Sleator/The Irish Times
Cyprus finance minister Harris Georgiades talking with President of the European Centeal Bank Mario Draghi at the opening of the ECOFIN meeting in Dublin Castle. Photograph: David Sleator/The Irish Times
Finance minister of the Czech Republic Miroslav Kalousek with Michael Noonan arriving for the ECOFIN meeting in Dublin Castle. Photograph: David Sleator/The Irish Times
Polish Finance Minister Jacek Rostowski with Minister for Finance Michael Noonan arriving for the ECOFIN meeting in Dublin Castle. Photograph: David Sleator/The Irish Times
George Osborne UK Chancellor of the Exchequer with Michael Noonan arriving for the ECOFIN meeting in Dublin CastlePhotograph: David Sleator/The Irish Times
European finance ministers agreed this afternoon in Dublin to extend Ireland and Portugal’s bailout loans by seven years, a move designed to ensure a smooth exit from the EU-IMF rescue programme later this year.
The development at the informal Ecofin meeting should make it easier for the Government to sell new debt to private investors as reduces the amount of money it needs to borrow as the State makes its return to markets.
Speaking after the meeting Minister for Finance Michael Noonan said the agreement to lengthen maturities of Ireland’s European Financial Stability Facility and European Financial Stability Mechanism loans by seven years was “ a very positive development” and marked “another significant step on Ireland’s and Portugal's journey to a full and sustainable return to the markets.”
The agreement would “ significantly reduce the amount of money that Ireland will need to borrow over the next decade or so,” he said. The agreement would “keep downward pressure” on Ireland’s borrowing costs , he said.
In a joint statement Eurogroup and Ecofin Ministers said they agreed “in principle” to extend loans to Ireland and Portugal by seven year.s The deal was contingent on “continued successful programme implementation”, it said. “The extension would smooth the debt redemption profile of both countries and lower their refinancing needs in the post-programme period” it said.
The maturity extension would “be confidence-enhancing for market participants and thereby protecting Portugal and Ireland from refinancing risks stemming from developments in other euro area programme countries like Cyprus” it added. Programmes in Ireland and Portugal are broadly on track despite challenging macro-economic circumstances, it said.
Moody’s Investors Service said an agreement to give Ireland extra time to pay back emergency loans was credit positive. “The restructuring will help ease Ireland’s debt repayment schedule, increasing its chances of regaining full market access and successfully exiting the bailout program,” the ratings company said in a e-mail response to questions.
The move had been agreed by euro zone ministers earlier today with support from the 10 non-euro ministers at a meeting this afternoon. The agreement of the non-euro ministers was required as they oversee the European Financial Stability Mechanism, a European Commission fund which is providing loans to Ireland under the rescue plan. The decision of the euro zone ministers applies to the European Financial Stability Facility, the euro zone fund.
"We congratulated the Irish authorities for the continued steadfast implementation of the programme and their successive steps taken towards a full return to market financing towards a full return to market financing at the end of the year," said Dutch finance minister Jeroen Dijsselbloem, who leads the euro zone ministers.
"Ireland is a living example that adjustment programmes do work provided there is a strong ownership and genuine commitment to reforms,” he said. Mr Dijsselbloem said the move was proposed by the EU-IMF troika and the EFSF fund "to smooth the redemption humps and reduce the refinancing needs" of the State.
"The ministers of the euro group would like to take a definite and positive decision on this extensionof the maturities of the loans by seven years pending the decision of the Ecofin colleagues later this afternoon, of course provided they continue successful to implement their programme as to be confirmed by the troika," he added.
EU Economics Commissioner Olli Rehn welcomed the extension of maturities, which will also apply to Portuguese bailout loans. "This is another very important step forward towards a sustained return to full market financing for both countries," Mr Rehn said.
"Of course it is crucial that both Ireland and Portugal continue along the path of determined programme implementation because ultimately the combination of growth enhancing structural reforms and consistent fiscal consolidation that will firmly reestablish investor confidence and ensure that the Irish and Portuguese people can put this very hard crisis behind them and move on to sustained growth and job creation.
European finance ministers and central bank governors have gathered for the first of two days of informal meetings of the Ecofin group in Dublin.
While the outline of a deal is being discussed in Dublin, a final decision on Ireland and Portugal's bailout loans will not be taken until the May meeting of European finance ministers, Mr Noonan confirmed earlier this week.
Other issues on the agenda are the creation of a European banking union and strengthening financial stability in the euro zone. "Banking union will further reinforce financial stability by diluting the link between banks and their personal sovereign, accordingly the Commission believes that the timeline for establishing a banking union should be as short as possible,"Mr Rehn said ahead of the talks.
The meeting will also provide finance ministers with the first opportunity to discuss the fallout from the Cyprus bailout debacle which has seen bank depositors targeted for the first time.
Responding to reports that Cyprus will have to find another €6 billion from its own resources for its programme, Mr Dijsselbloem said there was “no surprises” in the situation.
A number of groups are planning protests to coincide with the meeting. Representatives of the Garda Representative Association have been outside protesting with placards since 7.30am, while the Campaign Against Home and Water Taxes say thousands will march on Dublin Castle tomorrow in a show of opposition to property tax and austerity.
Additional reporting Bloomberg