Boost for Ireland as eurogroup backs loan extension

Ireland received a significant boost in its bid to seek an extension to the maturities of its bailout loans last night after finance ministers of the countries that share the euro currency backed the deal.

Finance ministers from all 27 EU states will consider the issue at a scheduled meeting in Brussels this morning, which is being chaired by Minister for Finance Michael Noonan.

EU commissioner for economic and monetary affairs Olli Rehn said he expected an arrangement to be concluded by next month’s meeting of finance ministers, which is scheduled to take place in Dublin.

While agreement has been reached in principle to extend the maturities, the scope and technical detail of how the extension of maturities will be implemented have yet to be worked out. If agreed by European finance ministers today, it will fall to the bailout troika to devise the technical details of the proposal.

Eurogroup chairman Jeroen Dijsselbloem declined to comment on the scale of the adjustments or whether new conditions would be imposed on Ireland and Portugal as a result of any deal.

Positive discussion

“It was a positive discussion on adjustments for these two countries. The technical shapes and forms are to be developed by the troika,” he said following the meeting yesterday evening. “It was a positive discussion, with a lot of appreciation for the successful work that has been done in Ireland and Portugal.”

Mr Rehn said the troika would examine “an appropriate and credible extension” of the maturities of the early EFSF and EFSM loans with the view to smoothing the path back to regular market access.

Speaking ahead of yesterday’s meeting, Mr Noonan had said that while Ireland was seeking an average extension of 15 years, this was unlikely to gain support.

Ireland and Portugal requested in January that the maturities of the EU portion of their bailout loans be extended. A combination of EFSM loans, which fall under the remit of the 27-member states, and loans from the euro zone’s EFSF temporary bailout fund comprised the EU’s contribution to Ireland’s bailout in 2010.

Ireland and Portugal are seeking a reworking of the terms on both portions of loans in tandem.

The IMF is not expected to extend the maturity on the portion of loans it contributed at the time.

The average maturity of Ireland’s bailout loans now stands at about 12 years, though the earlier tranches of loans issued had a much shorter maturity.

Ireland has more than €30 billion of bailout loans falling due before 2020, with significant repayment peaks between 2015 and 2018.

Any rearrangement of loan maturities would significantly reduce the State’s funding requirements.

Billions of euro

Mr Noonan has previously said a lengthening of maturities could bring “significant” benefits over a number of years worth “billions of euro”.

The Government is also pressing for the ESM fund to directly recapitalise the “pillar banks” AIB and Bank of Ireland.

The use of the euro zone’s bailout fund to directly recapitalise banks was discussed at yesterday’s meeting.