Van Rompuy backs lower bailout rate

PRESIDENT of the European Council Herman Van Rompuy said there are “real possibilities” of Ireland getting a lower interest rate on its bailout fund.

Ireland’s economy would turn a corner, he predicted, but there was a “bitter pill” for the people to swallow with budget cuts and austerity measures.

Speaking in Dublin after a meeting with Taoiseach Enda Kenny, Mr Van Rompuy indicated his support for a lowering of Ireland’s interest rate on the bailout.

Both discussed the bailout and the ongoing euro crisis in Greece among issues.

Mr Van Rompuy said Ireland was “well on track” with its commitments under the bailout. He praised the government’s jobs initiative launch and moves to control the Irish banking crisis.

He admitted the possibility of a reduction in the bailout was a “sensitive issue” for the country. But he added: “I think we need a deal, there are perspectives. We have to work on it but there are real perspectives.”

Important decisions would be taken on financial aid for Greece in the coming days, he said, stressing that the euro was still a strong currency.

Ireland’s exports were picking up, he noted.

“Ireland is on track. To cope with the crisis, your country can build on the strengths it has already shown in good times as in bad times — courage, dynamism, spirit of entrepreneurship and resilience.”

Mr Kenny said agreement would be needed to impose losses on senior bondholders in Anglo Irish Bank. The Government will hold talks on the issue with the European Central Bank (ECB) in the autumn. Mr Van Rompuy said negotiations would be needed on the matter and not unilateral action.

Mr Van Rompuy also said he had spoken to French President Nicolas Sarkozy about Ireland’s bailout interest rate last Wednesday. He said: “I think we are discussing solutions. I think there are real possibilities of getting an outcome on this issue…I left Paris more positive than I entered Paris on this particular point.”

Meanwhile, the ECB won an important victory yesterday on protecting private investors when Germany conceded that any bondholders involvement in the Greek rescue would be voluntary.

This would appear to weaken the Irish government’s hand in its wish to haircut senior but unsecured, unguaranteed bondholders of the defunct Anglo Irish Bank.

Finance Minister Michael Noonan upset markets earlier this week when he said in Washington he would ask the ECB in the autumn to allow him burn the bondholders worth about €5 bn.

And in Dublin yesterday the Minister was reminded by the European Competition Commissioner Joaquim Almunia that the government’s blanket guarantee to the banks in 2008 also limited his room for manoeuvre.

Referring to Anglo and the Irish Nationwide Building Society, Mr Almunia said, “The cost for taxpayers in these operations has been extremely high, and the margin of manoeuvre to seek burden sharing from senior bondholders was limited by the blanket guarantee granted by the authorities in 2008.”