State works on ‘longer-term’ debt pay plan

Tánaiste Eamon Gilmore has confirmed that the Government is pushing on two fronts to cut the cost of Ireland’s debt and annual €3bn interest payments.

Meanwhile, John Bruton, former taoiseach and head of the Financial Services Centre, said it was important that Ireland honoured its bailout commitments.

Up to now the emphasis has been on re-engineering the €31bn the Government gave to cover Anglo Irish Bank losses. However, the troika is considering ways to reduce the amount the country would pay on the €40bn it has borrowed from the EU’s bailout funds, according to Mr Gilmore.

“We are working with the troika to see if we can get the bailout money on a longer-term basis. Those negotiations are not yet completed. There are a number of options being looked at.”

Ireland has €22.5bn from one of the EU’s bailout funds, the EFSM, over a seven-year period and €17.5bn from the EFSF over a longer period giving an average payback period of 15 years. It is possible both could be extended to 30 years, during which time the State would hope inflation and growth would reduce them to a fraction of their present value.

Mr Bruton acknowledged that these were “very big and significant problems” which the Government was handling well.

“Anything that might be done for other countries we should also be able to avail of,” he said, adding that the agreement the State entered into on the bailout was legally binding.

“You can appeal to a higher morality but finance is finance and if you have to re-enter the markets, you have to have a reputation for honouring your commitments. We must remember that we have a significant primary deficit where we do not collect enough money to run the country even without the interest payments on the loans and so we need to borrow.”

The European Commission and the ECB denied the troika was considering changes to the loan repayment schedule for Ireland.

Mr Bruton, speaking in Brussels, supported an EU-wide banking union. If Britain opted out, it would raise serious issues for Ireland although, Ireland could benefit because some business being done in London could transfer to Dublin.

“But it’s not a simple thing. We have to do everything we can to ensure Britain is not isolated and the European institutions will want to do the same.”

Meanwhile, an ECB banking official urged European policymakers to avoid repeating a “single-minded” focus on austerity that helped bring the Nazis into power.

ECB governing council member Ewald Nowotny said in Vienna: “We must avoid the mistakes of the 1930s. We really have to be aware that this is an underlying theme.”