UNITED KINGDOM:LOANS FROM the United Kingdom to Ireland could significantly exceed the £7 billion speculated about in recent days, chancellor of the exchequer George Osborne has indicated. The UK would not seek "to make a buck" out of offering help to "a friend in need," he added.
The assistance will come from UK contributions to the International Monetary Fund and the European Union’s stabilisation mechanism, but the majority is expected to come through a separately negotiated bilateral loan denominated in sterling that will not be added to the UK’s own national debt.
Facing questions in a crowded House of Commons chamber from MPs, Mr Osborne said: “We are doing this because it is overwhelmingly in Britain’s national interest that we have a stable Irish economy and banking system. The current Irish situation has become unsustainable.”
However, he strongly indicated that the Conservative/Liberal Democrat alliance would not be prepared to offer similar help to Greece, Portugal or other EU states, since the UK has strong economic relations with Ireland, shares a land-border with it, while the UK exports more to Ireland than it does to Brazil, Russia, India and China put together.
Two-fifths of all of Northern Ireland’s exports go to the Republic; two of the four largest banks there are Irish-owned, accounting for almost a quarter of all personal banking accounts there, while Irish banks have an important presence elsewhere in the UK, said Mr Osborne.
“So it is clearly in Britain’s interest that we have a growing Irish economy and a stable Irish banking system. By considering a bilateral loan we are recognising these deep connections between our two countries. Crucially, it has helped us be at the centre of the discussions that have shaped the conditions of an international assistance package that is of huge importance to our economy. Of course, this is a loan and we can expect to be repaid.”
Mr Osborne repeatedly opted not to respond directly to questions from MPs who questioned whether the loans would be limited to £7 billion, saying that they would “be in the billions, but not the tens of billions”.
The contribution will be borrowed by the UK before being lent on to Ireland: “My understanding is that, of course, it will add to borrowing but we will get an asset in return – in other words, an Irish commitment to pay back the loan and it will not add to the deficit,” he said. Suggesting that the interest rate charged would not be punitive, he said: “We are not seeking to make a buck out of this.”
Asked by Conservative MP Chris Heaton-Harris for assurances that he was confident the Irish debts would be repaid, Mr Osborne said: “The answer is yes,” before adding that the past experience in International Monetary Fund interventions is that loans were almost always repaid.
Liberal Democrat MP Alan Beith said British taxpayers, already angered by having to bail out mismanaged UK banks, would “be even angrier about having to bail out even more mismanaged Irish banks”.
Questioned about his own praise in the past for Ireland’s economic success, the chancellor said: “There were plenty of Labour ministers who stood here praising what Ireland was doing to make itself competitive. The tragedy is that they did so much to make themselves competitive, but did not regulate their banking sector. We in the UK know the cost of that.”
Saying Ireland was “still a great country”, Fianna Fáil TD Margaret Conlon, speaking during an emergency debate at the British-Irish Parliamentary Association in the Isle of Man, said: “We are not the first country and we won’t be the last to run into a situation like this.
“We are aware that our nearest neighbours, Britain, had recourse to the IMF in 1976 and they emerged a stronger, better country. After such an event it was always considered that this would never happen again.”
Highlighting the inter-dependence between Ireland and the UK, Conservative MP Robert Walter said: “If there was economic failure in the South there would be an economic crisis in Northern Ireland and that would very much be a problem for the UK government.