Germany warns Ireland seeking Greek deal would be ‘disastrous’

Germany last night warned Ireland that looking for lower interest rates and longer maturity on its bailout, similar to the deal for Greece, would be “disastrous”.

Ireland and Portugal drew up battle lines to fight for better conditions on their bailout loans but Germany and France tried to dissuade them, warning that they should try to avoid looking like Greece.

Finance Minister Michael Noonan said that he would pursue the concessions given to Greece last week when the country is exiting the programme next year.

“The idea that the EFSF money will come at nominal interest rates and that the maturities will be extended by 15 years — that is an interesting idea as part of an exit strategy.

“We are looking at options to make our exit strategy more sustainable and get us back into the markets at low interest rates — in this context we will be exploring what possibilities are around that,” he said as he arrived for a eurogroup finance ministers meeting in Brussels.

The Portuguese prime minister also said his country will actively pursue the interest rate cut and longer pay-back time at “one of the next meetings of the eurogroup”.

He estimated the savings to Portugal on a 10 basis points cut in the EFSF loans would be some €20m a year.

Eurogroup president Jean-Claude Juncker said it was not discussed at last night’s meeting.

“The eurogroup is not prepared to give equally similar to these two countries when it comes to the decisions as concerned last week, but we will take this under exam,” he said.

This is not an indication that things will not change,” he added,

He said that there was some confusion about his previous statements when he told journalists the Greek conditions would apply to Ireland and Portugal.

But Berlin quickly reacted as reported by the Irish Examiner last week to such an idea, emphatically saying that the Greek conditions would not be available to any other country.

German finance minister Wolfgang Schaeuble reiterated this in Brussels yesterday when he said that he would not advise Portugal to consider such a step.

“I would shy away from the comparison with Greece if I were another member state in the eurozone, because Greece is a unique case.

“For Ireland and Portugal, which are in the process of returning to the markets step-by-step it would be a disastrous sign and that’s why I would really advise them not to further follow this point,” he said.

The French finance minister, Pierre Moscovici, said he shared the same view.

“For Ireland and Portugal, the plan is well under way.

“It is being implemented as planned with a possible return to the markets, so that is a completely different context and one that the countries are completely able to achieve,” he said.

The eurogroup agreed to Spain’s request for €39.5 billion from the ESM bailout fund, mostly for its four nationalised banks and €2.5bn for its “bad bank”.

Spain’s economy minister Luis De Guindos said earlier the loan would have 12-and-a-half-year maturity with a grace period of 10 years and an interest rate below 1% and just above 0.5% at least for the first year.

The sum is considerably less than the €100bn agreed in principle earlier this year.

Mr Juncker announced he will step down as president of the eurogroup at the end of the year or early next year.

Germany’s Mr Schaeuble has been tipped for the post when it may become a full-time position.