Minister for Communications Pat Rabbitte Pat Rabbitte said today he “hopes” that Ireland will secure a lower interest rate on its bailout loans from the European Union.
EU finance ministers are to hold meetings on May 16th and 17th to discuss the bailout for Portugal. Ireland's bailout is also expected to be on the agenda.
Mr Rabbitte said today Ireland would continue to negotiate for reduced rates. "The decision has not yet been made," he said. "The Irish Government has been constantly involved in talks on the interest rate issue and hopefully, hopefully it might be brought to an end at the Ecofin meeting."
The Minister said it is the Government’s view that the existing rates, which average 5.8 per cent, are "punitive" and must be lowered. "The whole point of this kind of agreement is that the country affected can get access to normal debt markets again within the timeframe prescribed," he told RTÉ Radio this afternoon.
Mr Rabbitte also said he would like to see a rescheduling of debt issued to Ireland under the €85 billion EU-IMF billion rescue package. "In my own view, the debt must also be rescheduled."
Mr Rabbitte was adamant Ireland’s corporation tax rate would not be the price for a reduced rate. “We must get the interest rate down without quid pro quo,” he said.
Mr Rabbitte also criticised the "prescription" for Ireland's recovery by UCD head of economics Morgan Kelly in an article in The Irish Times.
He said such a prescription would be "very, very devastating" for a number of years if it were to be followed by the Government.
“The implications of Morgan Kelly's prescription … is that we bring the public finances into kilter as quickly as possible,” he said. This would mean cutting up to €18 billion from public spending in one budget, would result in "serious cuts in pay and pensions, increases in taxes, cuts in the public capital programme".
The BBC reported on its website yesterday that a reduced interest rate for Ireland has already been agreed.
But a spokesman for the Department of Finance said last night there was "nothing new" in the report and negotiations were continuing. Any cut is still to be agreed and would involve only the loans from the European Financial Stability Mechanism and European Financial Stability Facility, the spokesman said.
Ireland stands to receive some €17.7 billion under the EU-IMF rescue plan from the EFSF, which is operated by the 17 euro zone countries, and €22.5 billion from the EFSM, a separate European Commission scheme.
