EC clears further €1 billion to State

Tue, Sep 18, 2012, 01:00

The European Commission has cleared the release of another €1 billion to Ireland under the EU-IMF bailout.

A further €700 million is to be released from non-euro zone countries. These disbursements will bring the total amount of European funding released to Ireland under the bailout so far to €36.6 billion.

The non-euro bilateral donors who pledged aid to Ireland are Britain, Denmark, and Sweden.

The latest tranche of funding comes as an IMF report concludes that co-operation with European institutions over bailouts in the euro zone has often delayed decision-making and excluded measures that could have been discussed.

While the IMF’s work with the European Commission and the European Central Bank on joint rescue packages for Greece, Ireland and Portugal has been useful and has improved over time, it also added “a layer of complexity” to the design and monitoring of conditions attached to the loans, IMF staff wrote in the report released yesterday in Washington.

Elsewhere, the Government considers issuing a 40-year bond to refinance the bailout of Anglo Irish Bank, allowing it to significantly reduce its annual repayments to cover the cost of the bank’s collapse.

The bond would replace the promissory note scheme through which the State pays off Anglo Irish Bank’s debts, according to Bloomberg reports, citing two sources familiar with the matter.

The main advantage of issuing a long-term bond is that the State would not have to pay the €3 billion a year it gives to the Irish Bank Resolution Corp (the former Anglo) on the back of the promissory notes. At present, the bank takes that money and gives it to the Irish Central Bank, which is funding IBRC through emergency liquidity assistance.

A Government spokesman declined to comment last night beyond saying that “complex technical discussions are ongoing and the objective is to deliver the best deal possible for the Irish taxpayer”.

Opting to issue a bond would mark a change of focus by Minister for Finance Michael Noonan, who has favoured accessing the euro zone’s long-term bailout fund, the European Stability Mechanism (ESM).

The bond plan would sidestep likely political opposition within the EU to using ESM funds to refinance the bank’s funding.

However, Ireland's hopes of securing bank debt relief have slipped further down Germany’s political agenda.

Irish Government officials are working the back rooms of Europe’s capitals, trying to put flesh on the bones of a June promise by European Union leaders to look again at Ireland’s bailout programme.

But German chancellor Angela Merkel indicated yesterday that agreement on such a deal is so far away that it has yet to even come near her chancellery, let alone cross her desk, for discussion.

“There’s no change on my agenda at the moment,” she said.

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