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.