Government negotiates on supports for exit from bailout programme

The Government is in negotiations with the troika about support mechanisms when the country exits the IMF/EU bailout programme at the end of 2013.

Finance Minister Michael Noonan’s preferred option is to be covered by the ECB’S Outright Monetary Transactions (OMT) programme when it makes a full return to the markets.

When the ECB president Mario Draghi launched the OMT in early September, he said it could include countries exiting bailout programmes. If the ECB agrees to backstop Ireland at the end of next year, then the Frankfurt-based institution would be able to buy up unlimited amounts of short-term Irish debt to ease funding pressures.

Mr Noonan said it was possible to make a full market re-entry from the end of 2013 onwards even without a deal on the bank debt. The Government has pumped €64bn into propping up the banking system. But the absence of a deal would mean that Ireland would have to pay a higher interest rate on future borrowings, he said.

The Government would like to be able to raise funds at close to the official rate of between 3%-3.5%. The finance minister noted Irish 5-year bonds are trading at 3.36% and 10-year bonds at 4.67% “which is not a million miles away from where we want to be. So if we had to, we could fund ourselves using 5-year bonds, but this would not be ideal”.

However, if the ECB announced it would cover Ireland as part of the OMT programme, that had the potential to shave 2% from Irish borrowing costs, Mr Noonan said.

The minister estimated Ireland would have to tap the markets for €10bn each year from 2014 onwards.