Mr Cowen is expected to tell his fellow EU leaders that Ireland is happy to change the treaty to allay German fears over lending to other eurozone countries. But, at Germany’s insistence, any countries tapping the bailout must pay penal interest rates, and this also applies to Ireland.
As a result although the European Commission and the European Stability Fund Mechanism can borrow on the markets at less than 3%. Ireland has to pay more than 5%, plus a handling fee.
For the Commission’s share of the loan of €22.5 billion, Ireland will pay substantially more than the Commission pays for the money, if it draws down the full amount. This “profit” will go back to the member states, including Ireland.
The terms of the money raised as a result of guarantees from the member states is similar, with a premium charged to the lender.
A government source said some people would like to see the Taoiseach raise the issue, especially since many blamed the German Chancellor Angela Merkel’s statement over private investors taking a hit for helping to turn markets against Ireland.
In what is expected to be his second last EU summit representing Ireland, Mr Cowen may be persuaded to raise it, especially as he comes to the meeting with a “yes” vote from the Dáil to the bailout conditions.
The Commission denied the additional charge was abusive. A spokesperson said that the rate had been set by the member state governments and added that even at 5.7% it was preferential compared to the close to 9% the country would be charged by the markets.
It disputed claims that it was charging more than the IMF for money, pointing out that the IMF loan, also of €22.5bn, had a variable interest rate and when computed was the same as that being charged by the Commission. The method of calculating the interest rate was agreed in May for the Greek loan and at the time the Taoiseach defended lending money to Greece at a higher rate of interest than for what Ireland had borrowed it.
The European Court of Auditors will examine any money the Commission lends to Ireland or any other country, Ireland’s member of the Court, Eoin O’Shea, confirmed.
Hungary, Latvia and Romania, who were lent money similarly raised by the European Commission, were not charged a margin, on the basis that the funds were a solidarity issue.