EURO ZONE finance ministers are to discuss a reduction to the 5.7 per cent interest charge on Irish bailout loans as early as next week, a move that follows repeated criticism that the current rate is too high.
The talks come as the EU authorities push ahead with contentious discussions on the expansion of the mandate and lending capacity of the rescue fund controlled by the 17 single-currency countries.
EU leaders are divided over such changes but any reopening of the fund’s constitution to facilitate such changes would provide scope to amend the interest rate, which is fixed in line with common rules for any recipient of rescue loans.
European officials have expressed caution about the prospect of an immediate move to cut the interest rate on the Irish loans, saying any reduction in the rate by the European Financial Stability Facility (EFSF) could have negative implications for its triple-A credit rating.
However, a euro zone source told The Irish Timesthat the question of a lower interest charge for the Irish rescue package would be raised when the ministers gathered in Brussels on Monday night. "This is at the discussion stage, not the decision stage," the source said.
The source went on to say that the ministers would debate the Irish interest rate as part of a wider scrutiny of the Irish bailout and a review of the Greek rescue plan.
The interest rate on the bailout loans is calculated by adding a predetermined margin to the borrowing costs of the Luxembourg-based EFSF and a separate fund controlled by the European Commission, which is known as the European Financial Stability Mechanism (EFSM).
Opposition parties have criticised the Irish interest rate, saying the Government was “ripped off” by its European partners. While the Government has defended the deal, there is concern that the interest charge may impede economic recovery.
Minister for Finance Brian Lenihan said last week that any reduction to the interest rate could not be made for Ireland “in isolation” as the rate was calculated according to a common approach.
Asked last night about the euro group meeting, a Government spokeswoman said there was “nothing to add further to the Minister’s comments of last Friday regarding the interest rates”. However, an Irish official in Brussels said it was likely that the euro group “will be regularly discussing progress in the implementation of Ireland’s EU-IMF programme”.
A spokesman for economics commissioner Olli Rehn cited Mr Lenihan’s remarks yesterday when asked whether talks on reducing the rate were in prospect.
“It’s very clear that these decisions were taken not for Ireland specifically; these decisions were taken for any country that would request financial assistance of the EU and the IMF,” the spokesman said.
Asked whether there would be talks on Monday on the possibility of reducing the margin generally, he said he was “not aware of such a discussion being scheduled and taking place next week”.
He added, however, that the commission did not set the agenda of the euro group or the Ecofin council of EU finance ministers.
At issue in discussions on the expansion of the EFSF’s mandate is the possibility of giving it powers to buy sovereign bonds and to make credit available to solvent countries outside the framework of an EU-IMF recovery plan.
Meanwhile, the first €5 billion tranche of Ireland’s €85 billion bailout has been drawn down by the National Treasury Management Agency (NTMA).
This follows the European Commission’s first bond auction under the €440 billion rescue programme. The €5 billion auction is the first in a series of sales by the EFSM and EFSF, which borrow money on behalf of euro zone members.
The NTMA is due to receive some €11.7 billion from the European agencies between now and the end of March to help cover the cost of running the State.