Noonan to ask EU for 40% cut to debt

Ireland will officially ask for changes to the EU bailout that could take up to 40% off the country’s debt figures when eurozone ministers meet in Brussels today.

The request comes after the successful return to the markets last week and follows promises by EU leaders to make changes to the massive debt that many believe is unsustainable.

Finance Minister Michael Noonan, anxious to follow up on the decision by EU leaders 10 days ago, will set the ball rolling on making the repayment of €64bn put into the banks cheaper.

He will be armed with indications from the troika, now carrying out their seventh review of the programme, that the country is hitting all its bailout targets.

“He will set out the facts of the situation and why we need a deal and why we should get it, and he will be urging that it be wrapped up as quickly as possible,” said a spokesperson for the Government.

No decision will be taken today other than to set out the next steps in the process, such as having technical experts work on producing a solution.

There are two elements to the deal Ireland is seeking. One is to deal with the €31bn of Anglo Irish Bank promissory notes and the second is the €33bn cash injection into the banks, including AIB.

A lot of work has already been done on the promissory notes to find a way of re-engineering them. Currently, the State must pay €3bn a year in interest payments, which will fall to €1.8bn from next year, bringing the total to about €48bn.

“More work needs to be done on the second element of the cash injections into the banks so that we can manage the debt better. This does not mean writing it down but finding a way to pay it off that is less burdensome,” the spokesperson said.

Ireland will also hope all or a sizeable chunk of the €64bn that has added about 40% to the Government debt will be taken off the books. The debt is due to reach 120% in the next few months.

When Ireland could expect the changes is not certain as it may be linked to arrangements for a single eurozone banking supervisor being put in place. Spain, offered up to €100bn to recapitalise its banks, is pushing for this to happen as soon as possible.

Discussions on the conditions for the loan are expected to take up most of the meeting this evening.

Greece will be looking for up to three years more to cut its deficit while Cyprus, which took over the EU presidency last week, is also seeking a bailout.

Ministers are considering holding a special meeting on Jul 20, when Ireland will be hoping a final decision on its situation could be taken.

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