Ireland 'not seeking debt restructure'

Minister for Finance Michael Noonan has reiterated that Ireland is not looking to reschedule its debt.

"From a policy point of view, the only item which the Irish Government is negotiating with the troika at present is a possible interest rate reduction," Mr Noonan told reporters in Brussels today. "There is no other item that we are negotiating."

Mr Noonan was speaking ahead of a meeting of European finance ministers this evening.

"We hope to get our country back to growth pattern and we would hope to fulfill the conditions of the bailout and we would hope to get out of this situation as time goes by and go back the markets," he said.

Meanwhile, Tánaiste Eamon Gilmore said yesterday that opposition to a cut in the interest rate on Ireland's bailout loans was down to a "small number of countries" as he acknowledged a deal is not imminent.

The standoff over the Irish interest rate comes as European ministers prepare to sign off on the €78 billion EU/IMF rescue of Portugal at talks tonight and tomorrow in Brussels. The Irish bailout will feature in these talks but it is not very high on the agenda, which will also be dominated by Greece.

However, the meeting in Brussels is set to be overshadowed by the arrest of IMF chief Dominique Strauss-Kahn. Mr Strauss-Kahn, a central figure in the battle against the sovereign debt crisis in the euro zone, had been due to attend the meeting, which continues tomorrow.

The EC said the IMF's role as the contributor of a third of the bailout money for Greece, Ireland and Portugal won't be hampered by Mr Strauss-Kahn's arrest.

German finance minister Wolfgang Schäuble insisted yesterday that the Greek rescue would only be extended if private creditors were also involved. A “central point” of any new deal would be to avoid a situation in which private creditors were relieved at the expense of taxpayers, he said on German television.

All of Greece’s public debt would have to be rescheduled if the EU/IMF portion of its debt was to be rescheduled.

Although a voluntary rescheduling of Greek debt has been mooted in Athens and other euro zone capitals, Mr Schäuble’s remarks suggest would appear to rule that out.

Mr Gilmore did not identify France by name yesterday when speaking about the Irish bailout at Labour’s annual James Connolly commemoration in Arbour Hill. He said the Government had been clear in rejecting calls for a quid pro quo in return for a rate cut and believed that a higher rate of interest “out of line with other countries” should not be applying to Ireland.

The Government says the interest rate on the European portion of the Portuguese loans will be roughly 0.75 percentage points lower than the Irish rate, which is around 6 per cent.

Although EU leaders agreed in March to cut the interest rate on the Greek loans by one percentage point to some 4.2 per cent, Taoiseach Enda Kenny refused to yield to pressure to dilute Ireland’s corporate tax regime in return for a similar rate reduction.

France has repeatedly called on Ireland to increase the 12.5 per cent corporate tax rate as a prerequisite for any cut in the interest rate on bailout.

Germany is also campaigning for a quid pro quo on corporate tax but may accept an unambiguous pledge from Dublin to constructively engage in talks on the introduction of a common consolidated corporate tax base (CCCTB), something Mr Kenny describes as a back door route to tax harmonisation.

Mr Gilmore said it was unsustainable for other countries to argue that a lower interest rate should not apply to the Irish bailout. “Ireland is working the programme, we’re making progress, the projections are that we will return to growth this year and there are new measures to bring about economic recovery,” he said.

While Minister for Public Expenditure Brendan Howlin said last Friday that Dublin hopes to reschedule the EU/IMF portion of Ireland’s debt in due course, Mr Gilmore said a request for such a rescheduling did not form part of the Government’s current approach.

Additional reporting: Bloomberg