1% cut in EU bailout loans rate ‘after June’

IRELAND should automatically get a 1% reduction in the interest rate on its EU loan after June, European Commission sources have confirmed.

Member states have already agreed the new rate should be reduced to 2% rather than 3% over the borrowing rate, but this has to be approved by all the member states governments by June.

In the meantime, all the MEPs stressed the need to cut the cost of the loan when they met Economics Commissioner Olli Rehn in the European Parliament yesterday.

Taoiseach Enda Kenny had hoped to secure the 1% cut in the rate at his first EU summit in early March, but this was not possible because France demanded an increase in the country’s corporation tax rate in exchange.

Finance Minister Michael Noonan will most likely not be able to achieve the reduction when he meets his EU colleagues informally in Budapest on Friday, partly because the Finnish government elections are on April 17 and also because no binding decisions can be made at an informal meeting.

However, he will be anxious to try to get a cut before the next tranche of the loan — €8.4 billion — is due, but the date for this has not yet been fixed. The next full meeting of finance ministers is on May 16/17.

“We would like to see a lower interest rate for Ireland to make the debt more sustainable,” an EU source said.

“This should happen by June, though it might be later. It would be applied to any further loans for Ireland,” the source said. It would not require a quid pro quo, such as a change in the company tax rates, as the programme is already fixed.

Fine Gael MEP Sean Kelly said that as far as he was concerned the penal rate was illegal. “But any response I’ve got from the Commission has only muddied the waters further,” he said.

Others emphasised the need to make changes to the austerity programme to allow for growth in the country. “The fall in revenue shows it’s not working and we need to make adjustments for growth,” said Labour MEP Proinsias de Rossa.

New Socialist MEP Paul Murphy walked out of the meeting having refused to agree to keep the conversation confidential.

“It’s outrageous,” he said.