The Minister for Finance Michael Noonan wants a credit line in place for when the country exits the EU/IMF bailout programme in November.
“I would like us to get back into the markets at low interest rates and that we will have some type of credit line, which if we needed it would act as a backstop or a guarantee to the markets that we are a safe bet to the markets that we are a safe bet to lend to at low interest rates,” the minister told reporters at an event in the Irish Stock Exchange.
So far, there has only been preliminary talks on what a credit line might look like. “There was a general discussion [with the Troika] on an exit strategy, but we will not conclude talks on exit strategies until the autumn — after the German elections,” said Mr Noonan.
But feedback about the latest review of the economy was positive, he added. “The Troika is working away at official level. The format is that there is normally a meeting with myself and Minister Howlin and then there is a concluding meeting which we will have [today]. But the briefing I am getting back from officials is that everything is fine and we are working our way through it.”
The Troika originally wanted the Irish banks to undergo stress tests before the exit from the bailout programme in November on the basis that a possible recapitalisation of the banks presents the biggest contingent liability for the State.
But now the stress tests have been postponed until March at the earliest to coincide with the EU wide stress tests.
As it stands, there is no political agreement in place to recapitalise the banks through the ESM. Consequently, if the banks need more capital and they cannot source it from the private markets, then the Government would have to take responsibility for the shortfall.
If this scenario were to unfold, then it would be crucial to have a credit line in place.
Moreover, it looks like it would be the IMF would have to extend the credit line. An ECB source has told the Irish Examiner that the bank’s outright monetary transactions programme could not be used as a credit line by Ireland.
“First of all it would be up to the [ECB] Governing Council to decide if a country is eligible for outright monetary transactions. But it is meant to be a precautionary measure in the event the markets think that the euro is going to break up so it is not a credit line as such. It would be up to the IMF or the [EU] Commission to provide a credit line for Ireland,” says the ECB source.
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