Lenihan says state will not lose money on Greek loan

FINANCE Minister Brian Lenihan, has said the conditions being attached to the state’s loan to Greece will ensure that Ireland does not lose any money.

He also said Ireland’s own exposure to Greek sovereign debt was minimal. But he conceded that international banks based in Dublin’s IFSC could have more substantial exposures to Greek debt.

Speaking after he had briefed the Cabinet on the bailout, Mr Lenihan said Ireland will contribute about €1.312 billion over a three-year period, with the first tranche of that – slightly under €500 million – going to Greece this year. Greece will pay interest on the loan, thereby covering any Irish costs in providing the money.

Legislation needed to approve the loan is being drawn up. It is expected to go before Cabinet next Tuesday, and before the Dáil the following week.

“It is of some urgency, of course, because we’re not in a position to make the loan until we enact the legislation,” Mr Lenihan said. “However, we are satisfied from official contacts that sufficient funds are available to meet any immediate Greek requirements, and we are giving the clear signal now that Ireland is taking its part with the other euro area states in this matter.”

Reacting to opposition calls for more information, Mr Lenihan said he was prepared to brief the parties this week if they wished. But he suggested a briefing might be more beneficial when the bill was ready for publication.

Mr Lenihan stressed that the banks covered by the state’s bank guarantee scheme had a combined exposure of less than €40m to Greek sovereign debt, while the state had an exposure of just €1m.

Meanwhile in Brussels, Spain’s prime minister has made a desperate attempt to quell rumours and halt market speculation against his country.

Jose Luis Zapatero described as “complete madness” reports that Spain was due to ask for a €280bn bailout.

He appealed to people to look at figures that showed growth returning to the economy. “Rumours like this have an effect on our markets and would put us in a very serious situation, which is why I am saying we cannot keep speculating on forecasts and what happens next – we have to stick to facts.”

Figures for government deficits, debt and expected growth for all EU countries are due out today and will show that 25 of the 27 member states have government deficits over the benchmark 3% of GDP – Estonia and Sweden being the only exceptions.

Respected German economist, Daniel Gros, yesterday said Portugal was quite likely to be the next country to need a bailout as its economic situation was like that of Greece.