Decision likely soon on post-bailout credit line

The Government is likely to declare this week whether it will seek a post-bailout credit line from its international sponsors, with expectation increasingly fixed on the "clean break" option of going without additional aid from Europe and the IMF.

It was unclear last night whether the Cabinet would make an official decision at its weekly meeting today. Minister for Finance Michael Noonan has not circulated a memorandum in advance of the gathering, and there is no listing of any discussion of the exit strategy on the formal agenda for the meeting. However, sources familiar with Cabinet procedures said it remained possible to add the topic to the agenda.

'Not convinced'
While any move to exit the bailout in mid-December without a precautionary credit line would be in defiance of the wishes of the ECB and the IMF, the EU Commission is "not convinced" of the requirement for a credit line. It remains the expectation in Brussels that Ireland will leave the bailout without taking out a credit line from the European Stability Mechanism fund.

The Coalition has kept its options open in any public remarks, but the requirement for clarity in its communications with other countries is well recognised in Government circles.

A key consideration for the Coalition is the fact that the current interest rate on Irish 10-year debt, about 3.53 per cent, is favourable.

Fiscal conditions
A further consideration is that the Government would rather not pledge itself to any additional fiscal conditions as the price of taking out a credit line. Any such conditions would have to be kept even if money was never drawn down.

While this might be difficult politically for the Government, the argument has been made in troika circles that Dublin will still be bound for many years to run very tight budgets.

Troika inspectors had made the case that the Government could wait until the new year – and the installation of a new government in Germany – but Mr Noonan said last week he wanted to settle the matter definitively before the bailout reaches its conclusion.

The Minister will brief his euro zone and EU counterparts on his thinking in Brussels on Thursday and Friday.