Loan to Greece will not put State at 'financial disadvantage'

IRELAND WILL suffer no financial disadvantage through its €1.3 billion loan to Greece, Minister for Finance Brian Lenihan has told the Dáil.

He said the loan would be repaid as Greece’s economy improved and would not be included in the deficit because “it is classified as a financial transaction”. Mr Lenihan was speaking during the opening debate on the Euro Area Loan Facility Bill 2010, legislation to provide for the State’s contribution to the EU rescue plan for Greece and the stability of the euro. The legislation is expected to complete all stages by tonight. Mr Lenihan said that “member states’ funding costs are to be met in full.

“In other words, we will not be financially disadvantaged by these arrangements.”

The Minister said the EU commission confirmed that “there will be no loss to euro-zone taxpayers arising from the provision of these loans. In addition, from a budgetary perspective, these arrangements will be taken into account by the commission in its fiscal surveillance procedures.”

Ireland’s share of the loan will be just less than 1.64 per cent and payments will be made on a phased basis. Mr Lenihan said “there is a likelihood that there might be some ‘frontloading’ of our overall contribution.”

Ireland’s overall contribution “is anticipated to be about €1.3 billion”, but the legislation “provides for a precautionary upper limit of up to €1.5 billion”.

Mr Lenihan also said Opposition suggestions that proposals to “reinforce economic coordination” represented a dilution of Ireland’s “sovereignty over taxation matters” were “mischievous”. Enhanced co-ordination aimed “to assist member states to be better prepared for any future crises”.

Referring to the domestic situation, Mr Lenihan said “my prediction in December’s budget that the economy would bottom out by mid-year and that positive growth would resume in the second half of this year is being borne out.”

Fine Gael finance spokesman Richard Bruton welcomed the Bill, but said the €1.3 billion cost “will raise our public debt by almost 1 per cent of GDP”.

There was an additional €7.2 billion guarantee and there had to be “robust scrutiny” because the question was “whether it will work”.

Labour finance spokeswoman Joan Burton said Ireland had its own “direct interest in saving Greece” and she described it as “selfish solidarity”.

Greece was “the weakest link” and “while Ireland’s economy is very different to that of Greece – with substantial inward investment from the multinational sector – we can just as easily become a target for bond traders”.