The proposal to borrow on the markets at around 2% to pay off around €18bn to the IMF that is currently charging around 5% “is logical”, and sets a good precedent for other programme countries, a senior EU official said.
The minister met a positive response from European Economics Commissioner Jyrki Katainen, who as Finnish finance minister at the start of the crisis was very critical of Ireland and against any easing of the loan conditions.
Conditions attached would be that the IMF will continue to be involved in the post-programme surveillance, and that the European Commission produces a technical paper to show how it will make the debt more sustainable — conditions Mr Noonan said he had no problem with.
The minister continues his tour of the relevant bodies to convince them of the merits of the plan and to point out that it would make the debt more sustainable and so more likely that other creditors would get their money back.
He travels to Luxembourg today for discussions with the EU’s bailout fund executives in the ESM and EFSF and then onto the ECB in Frankfurt where he will meet the bank’s president Mario Draghi.
While the ECB’s assent is not required for the Irish proposal, it is important to ensure they are not opposed. Mr Noonan said he expects that Mr Draghi will bring up a number of issues, including the early sale of the former promissory note bonds. The minister insisted the two issues were not linked and that the bonds question was one for the Irish Central Bank, and over which he has no say.
He will meet eurogroup president Jeroen Dijsselbloem in the Hague and he said he would discuss the issue with finance ministers from the other 27 countries when they meet in Milan on Friday and Saturday, but a final decision is not expected until next month.
However, a number of countries, including Germany and the Netherlands, need to get the agreement of their parliaments.
Three countries — Britain, Denmark and Sweden — made bilateral loans to Ireland and reduced their interest rates as the EU did. Mr Noonan indicated they had no objections but said Britain was anxious that the IMF would continue as part of the post-programme surveillance troika.
Ireland intends to raise €18bn from the markets over a 12-24 month period to repay the IMF, which would leave €4.5bn outstanding , so the IMF would continue to be part of the troika. Mr Noonan said the Government also wanted this as the would provided balance.
A senior EU official described Ireland’s plan as quite logical and said having broad support from member states would set an important precedent for other countries when they were in a similar position.
But he acknowledged that what was outstanding was the political evaluation. “There may be EU, euro-area and national considerations...but I would expect this not to raise any major issues”, he said, especially if the IMF were to continue to be involved in the post- programme surveillance.