THE BRITISH government has not been asked to reduce the interest rate charged on a €3.8 billion bilateral loan, Taoiseach Enda Kenny said following talks with British prime minister David Cameron in 10 Downing Street yesterday.
However, Mr Kenny hinted that the issue might emerge later if Ireland can secure an interest rate cut in European Union and International Monetary Fund loans from the current round of talks between EU finance ministers.
Despite opposition from some Conservative MPs, Tory chancellor of the exchequer George Osborne last year agreed a €3.8 billion, 7½-year loan to Ireland to support its economic stabilisation plan and “restore its capacity to finance itself”.
The loanwill cost under 6 per cent – slightly lower than the cost of the EU loan.
Answering questions outside Downing Street after his 45-minute meeting with the prime minister, Mr Kenny said: “No, we didn’t discuss the question of a cut in the interest rate in the British loan. The prime minister made the point that it was put through very quickly here and there wasn’t any difficulty with that.
“The drawdown won’t occur until later in the year anyway, at which stage the ministers of finance may well have concluded the decision that they have to make in respect of the IMF-EU loans. Any reduction anywhere would be welcome.”
So far the British government has not indicated any willingness to amend the terms of the loans. But even if this was forthcoming it would face parliamentary difficulties because the interest rate is laid down in legislation passed by the House of Commons.
During a speech in financial news agency Bloomberg’s headquarters earlier, Mr Kenny said Ireland would “continue to make the strong case for a reduction” in the cost of servicing the loans from the EU and IMF.
Stressing that Ireland’s economic difficulties can be resolved, Mr Kenny refused to be drawn on speculation that the Greek government had already raised the issue of restructuring its debts.
“There are serious challenges for many countries, but we are focusing on ours. Our problems, we believe, are surmountable. The mandate given to me and the Government is to sort this problem and deal with the fundamental issues that have been around for some time,” he said.
Later he added that the first interest payments on the EU-IMF loans are not due until October/ November.
“There is time now to reassure our European colleagues about how serious we are about this,” the Taoiseach said. “We want to get back to a position as quickly as possible where we can say goodbye to the IMF and the EU in terms of this particular deal and get back to the bond markets and be in charge of our own economic destiny. That is the challenge.”
However, he firmly ruled out increasing Ireland’s corporate tax rate in return for interest rate reductions. “It should not be dependent on Ireland making a concession that would threaten the economy’s growth potential. That would be utterly self-defeating,” Mr Kenny said. “That is why we simply could not accept any adjustment in the rate as it would damage the prospects for our recovery.”
His remarks came following a speech which highlighted the fact that 126 foreign companies had set up operations in Ireland last year.