Govt welcomes EU debt plan but crisis fears continue

Taoiseach Enda Kenny and Finance Minister Michael Noonan have both welcomed an agreement which could improve the terms of Ireland’s EU/IMF bailout deal.

Ministers from the 17 eurozone countries at a meeting in Brussels last night promised changes to the European Financial Stability Fund (EFSF), including cutting interest rates, extending payback time for loans and allowing countries to buy back their debts at now-reduced market rates.

It came amid fears that the European debt crisis could spread to Spain and Italy after the cost of borrowing for those countries continued to soar today.

Eurozone Finance Ministers will meet again today to discuss the finer detail of the agreement, which must be passed by the national parliaments of eurozone countries before coming into effect.

Taoiseach Enda Kenny today said the deal, when finalised, will be positive for Ireland.

“Ireland has pointed out – principally through the Minister for Finance - that pricing levels have been too high in Europe and there should be great flexibility,” he said.

“Arising from the discussions yesterday, we would regard this as being a generally positive measure. Obviously the EcoFin ministers and the Minister for Finance will have to come back to this on a number of occasions before they arrive at a conclusion, possibly in the next couple of months.”

Minister Noonan meanwhile said the "Irish position has been significantly improved" by the agreement.

“These measures are designed to make Ireland and Portugal’s positions more sustainable,” Minister Noonan said.

“Certainly the cost of the bailout would be less going forward, particularly in the medium term.”

However the agreement appeared to have little effect on jittery global markets today, as stocks fell amid mounting investor concerns over debt contagion.

The value of the euro also hit a four-month low this morning, while the long term cost of borrowing for Italy and Spain has again reached record high levels.

Italian Finance Minister Giulio Tremonti has been forced to leave talks in Brussels and return to Rome to deal with the mounting debt crisis at home.

EU Economic Affairs Commissioner Olli Rehn is however adamant that Europe is not losing control of the debt crisis.

“We are now reinforcing our collective crisis response with (the) measures we have put forward, including the forthcoming decision on the enhancement of the flexibility and scope of the European Financial Stability Facililty," he said.