Talks on Irish bailout to resume
Irish officials will today resume talks with a delegation from the EU and IMF on the terms of a €85 billion bailout for Ireland, ahead of the likely announcement of an agreement tomorrow.
Minister for Transport Noel Dempsey refused to comment today on the likely interest rate to be attached to the loan. It was reported last night that the rate could be as high as 6.7 per cent.
However, The Irish Times understands the average annual interest rate would be in the region of 5.5 per cent.
Asked when the deal would be completed, Mr Dempsey said it was better to get the right deal rather than a quick deal.
Minister for Communications, Energy and Natural Resources Eamon Ryan said today the 6.7 per cent estimate was incorrect and that it was unfortunate this figure had entered the public domain.
Labour Party leader Eamon Gilmore described as "deeply disturbing" reports that the interest rate might be as high as 6.7 per cent.
"If true, it would be an appalling capitulation by the Irish government. And it would be a betrayal of the founding principles of the European Union," he told a party conference.
Fine Gael party said last night any rate over 6 per cent would be unacceptable.
European officials hope the rescue will help draw a line under the debt crisis. Having started in Greece, it now threatens to engulf countries like Portugal and Spain, the fourth-largest economy in the euro zone, and could jeopardise the future of the euro itself.
Market pressures have shown no signs of easing, despite Ireland’s request for aid. The euro stumbled to a two-month low against the dollar yesterday and the risk premiums investors demand to buy Irish, Portuguese and Spanish debt instead of German Bunds hovered near record highs.
Unions are holding a march through Dublin today in protest against the bailout and a government austerity drive underpinning it, but overnight snowfall could hurt turnout.
Labour and Fine Gael want bond investors who lent money to Irish banks to take on a bigger share of the bailout burden, rather than foisting it all on Irish taxpayers.
RTÉ reported last night that the interest rate would be around 6.7 per cent, at the high end of expectations, and above the rate of 5.2 per cent secured by Greece for its €110 billion package.
"The public are led to believe that sharp belt tightening is going on, when we've barely begun," said Societe Generale analyst Ciaran O'Hagan in a research note.
Once the Irish bailout is agreed, investors may turn their attention to Portugal, which passed an austere budget for 2011 yesterday but is struggling to meet deficit reduction targets.
Portuguese prime minister Jose Socrates said late last night that he expected passage of the budget to boost market confidence, but poll this week showed a majority of economists believe the country will be next in the firing line.
Jean-Claude Juncker, the head of the EU's group of euro zone finance ministers, defended Portugal against suggestions that it could end up being bailed out like Ireland, saying there were no parallels between them.
"Portugal has presented to its parliament a meaningful budget plan, and the financial sector shows signs of robustness," he said in an interview published today with Belgium's French-language daily L'Echo.
Additional reporting: Agencies