Rehn backs deal on Irish debt
European Union Economic and Monetary Commissioner Olli Rehn said today Ireland and Portugal could draw on a European Central Bank bond-buying programme to help them become the first bailout countries to be weaned off official aid and move back to market financing.
"The option of combining a precautionary program with the ECB's outright monetary transactions is something that should not be ruled out, and is one option that should be considered as a way of smoothing the way for a successful return to market financing," Mr Rehn told reporters after a meeting of EU finance ministers in Brussels today.
In a further concession, Mr Rehn said he favours giving Ireland and Portugal more time to pay back bailout loans, extending to them the same treatment granted to Greece last year. Any decision by the ECB to deploy its as-yet unused unlimited bond-purchase facility would rest with the independent central bank, he added.
Last night, euro zone finance ministers agreed in principle to extend the maturity of Ireland’s rescue loans, a move with potential to cut the cost of the bailout by billions of euro.The ministers called late last night for an examination of the maturity of Ireland’s loans from the EFSF, the fund controlled by euro zone countries.
Minister for Finance Michael Noonan stressed there was no final decision but said there was “no objection of any sort” to this move at talks in Brussels. There was “a decision in principle to proceed in this manner and it will enhance the sustainability of the Irish debt and it is additional to all the other measures we have in play”, he said. He said the deal could save Ireland "a certain amount of billions".
Today, Mr Noonon sought a similar examination in respect of loans from the EFSM, a separate fund controlled by the European Commission.
"Lengthening maturities at low interest rates has the potential to enhance the sustainability of the Irish debt and over a period of time cost us less in servicing the debt," Mr Noonan told reporters in Brussels today before chairing the meeting of EU finance ministers. "This will make the overall debt position more sustainable and increase the willingness of the markets to lend to us at low interest rates."
The examination follows a new deal for Greece in which the maturity of its rescue loans was extended. The maturity of Portugal’s loans will also be examined in coming weeks. “The euro group agreed to refer this issue to senior officials to examine the technical details and they will report back shortly,” Mr Noonan said last night.
The development comes two months ahead of the deadline for a deal with the ECB to recast the Anglo Irish Bank promissory note scheme. This is central to the Government’s push to regain access to private debt markets.
Under the bailout programme, Ireland received a pledge from the euro zone rescue fund, the European Financial Stability Facility, for €17.7 billion. The European Union's separate rescue fund, the European Financial Stability Mechanism, granted Ireland a further €22.5 billion. Mr Noonan said he would make a separate request for an extension to that at a meeting of EU finance ministers today.
Fianna Fáil finance spokesman Michael McGrath claimed a deal to extend the maturity on loans to Ireland from the EFSF was already committed to in July 2011 by EU governments but has yet to be implemented. “In a communique on 21 July 2011, the Heads of State or Government of the Euro area agreed to extend the maturity of EFSF loans to Greece to up to 30 years and it was agreed that this concession also be extended to Portugal and Ireland," he said. "While I welcome the commitment of the euro zone finance ministers to examine this, the question is why has this measure not already been implemented?"
Sinn Féin finance spokesman Pearse Doherty said the deal will not save the taxpayer any money. Mr Doherty said more needs to be done - such as securing an interest rate holiday. “This is something that would have a real, direct impact on people’s lives but it appears it is has not been achieved,” Mr Doherty said. "We will examine the details of any agreement to see what has been really achieved.
“The fact is that without a reduction in our interest rates or an interest holiday, as secured by Greece and as called for consistently by Sinn Féin, not a single red cent will be saved by the Irish taxpayer during the lifetime of this Government.”