European Commission to support cut in bailout rate
The commission welcomed the fact that under the results of the bank stress tests Ireland would have to draw down €11 billion less than was provided for the banks in the EU/IMF programme.
They said the stress tests that resulted in the banks needing €24 billion in capital were very credible, setting even tougher conditions than the tests on about 90 other EU banks planned for June.
“We support the interest rate reduction for countries, including Ireland, borrowing from the European Financial Stability Fund, because we think it will help to protect the sustainability of the debt,” said Mr Rehn’s spokesperson, Amadeau Altafaj Tardio.
Finance Minister Michael Noonan will hope to get the nod from his EU colleagues in Budapest next Thursday and Friday. The Government has been told they must offer something in addition to the programme conditions in exchange for the rate cut.
Mr Noonan will be hoping that there will be no French or German demands for an increase in our corporation tax. Instead, he will be willing to agree to discuss the issue of harmonising corporation tax base assessment or legislating to limit state debts and deficits in future.
However, the ECB is expected to increase interest rates by 0.25%, which will take some of the shine off the expected 1% cut on the 5.8% rate on the loan.
The commission denied there had been any political interference in the conduct of the bank tests or in the decision by the European Central Bank to provide funding for the banks over the next three years.
The ECB announced they would continue to provide liquidity to the banks during their restructuring, even if the country’s credit rating was cut by the agencies.
