Preparations to ease Ireland’s exit from the bailout and back into the markets took another step forward yesterday with agreement to allow the country longer to repay at least some of its borrowings.
Final agreement on the details is expected to be included in a package being prepared by the troika and which will be discussed by EU finance ministers in Dublin next month.
The moves, which will not necessarily cut the cost of the bailout but will mean not too much money is repayable at the same time, was welcomed by Finance Minister Michael Noonan.
Economics Commissioner Olli Rehn said ministers would work hard on the measures “that will send a strong signal of confidence” in Ireland.
He said he was very pleased with the agreement that the troika should propose the best possible option for a potential adjustment of maturities for both Portugal and Ireland.
“This is with a view to further support a successful exit from the programme and a sustainable return to full market financing,” said Mr Rehn.
There are a series of options, ranging from extending the terms of the shortest loans and shortening that of the longest — which would be considered to be neutral — to adding up to five years to the length of all of the EU’s loans.
However, they will have to consider the situation in Germany, where elections are to be held in September. A big change would require agreement by the Bundestag, while a smaller one would need the agreement of a committee that would be more likely to agree.
Mr Noonan also welcomed the agreement by the finance ministers from all EU countries to have the troika come back “with the best possible option” on adjusting the maturities.
Each of the tranches of the EU bailout fund came for a different period of time but overall it came to an average of 12 and a half years. Mr Noonan said earlier this week he expected the new agreement would extend this average to 15 years.
A few months ago, the Government hoped this could be extended further, to 30 years. There is already agreement to roll over €1.5bn of the EU’s loan due in 2015, when State repayments due reach €10bn. A new agreement could see the other tranches — due to be repaid in three, eight, 11, 25 and 29 years — extended. There is no indication the IMF will extend maturities of its loans.
The interest rate on any rolled-over amounts could change depending on the prevailing interest rate of the time.
Mr Rehn welcomed the news that employment in Ireland had grown for two successive quarters for the first time since the beginning of the crisis. “While two quarters do not make an employment spring, growing confidence in Ireland has started to be reflected in the real economy and employment,” he said.
Latvia is hoping to become the 18th member of the eurozone and has asked the Commission to evaluate it to see if it fits the criteria for membership. A full report should be available by June and the country — now with the fastest growth rate and second highest export growth in the EU as it emerges from a harsh recession — believes it could adopt the euro next January.
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