Ireland may not need precautionary credit to exit bailout, says Rehn

Economic and Monetary Affairs Commissioner believes Dublin could exit on its own

Economic and Monetary Affairs Commissioner Olli Rehn said it was still premature to see if there is a need for any precautionary arrangement. Photographer: Andrew Harrer/Bloomberg

Economic and Monetary Affairs Commissioner Olli Rehn said it was still premature to see if there is a need for any precautionary arrangement. Photographer: Andrew Harrer/Bloomberg

Fri, Oct 11, 2013, 21:36

Ireland may not need precautionary credit to exit its bailout programme, according to EU Economic and Monetary Affairs Commissioner Olli Rehn.

Mr Rehn said the reform programmes in Ireland and Spain pledged in exchange for financial support were on track and both economies were growing strongly.

“We are currently holding discussions with both countries as well as within the Eurogroup, to see what is the best way to successfully exit the programme,” he said.

“The principle that it is better to be safe than sorry prevails and we will look into what are the best ways to ensure a successful exit from the programmes.”

“Thanks to the economic turnaround supported by the programmes in both countries they have a very good chance of exiting the programme successfully and returning to durable market funding,” Mr Rehn, who was in Washington for talks with the IMF, said.

“It is still premature to see if there is a need for any precautionary arrangement. I would not rule it out, but, as I said, both have a very good chance in succeeding even without a precautionary arrangement,” he said.

The Government has indicated it intends to seek a €10 billion credit buffer from Brussels to insulate it against any market shocks when the bailout expires in December.

European Union officials hope that Ireland may mark the beginning of the end of the euro zone’s debt problems if it does draw a line under its funding worries next year.

Concerns about how Spain’s economy will function in an era of tighter credit and more constrained housing markets continue to weigh on the prospects for its banks and government.

Some policy-makers in Brussels have said that Spain and Ireland would be wise to seek a new credit line, just in case. Even if never used, it would enable the European Central Bank to include Ireland or Spain in its programme of government bond purchases, sending a powerful signal of confidence to markets.

But such credit lines would also come with conditions and further close monitoring - limiting the choices in economic policy-making that governments accept only as a last resort. Mr Rehn said that it was far too early to discuss the arrangement for Portugal’s exit from its bailout programme. Lisbon’s financial lifeline from the eurozone will end in the middle of 2014.

He noted Portuguese exports and domestic demand were on the rise but said the country was still facing many challenges.

Additional reporting by Reuters