Loans extension deal 'worth a lot'

An international deal giving Ireland more time to repay its bailout loans is worth a lot to the country, Finance Minister Michael Noonan said.

But he admitted it would not significantly impact on the economic burden on people at home over the coming years.

Finance ministers from across Europe struck the deal at a major summit at Dublin Castle.

The agreement gives Ireland about seven years longer to pay back loans issued under the IMF/EU/ECB rescue package.

Mr Noonan said this would allow Ireland to restructure its debt and return to normal borrowing on the international money markets.

“If you think of your debt as a mountain range, you’ve got peaks and you’ve got valleys,” he said.

“It is very hard to borrow money on the year your repayments peak, and if you’ve got a Mount Everest in 2022, it’s very hard to buy (loans) in 2012 on a ten-year basis because your capacity to repay the money is diminished.”

Mr Noonan, flanked by Olli Rehn, European commissioner for economic and monetary affairs, Jorg Asmussen of the ECB and EU commissioner Michel Barnier, said Ireland could now lower its debt peaks and increase its valleys.

“It is worth quite a lot in cash flow terms because obviously money that had to be paid up front, we have capacity to put (repayments) back,” he said.

“The real deal is that it allows us now to borrow money, so that the repayments will come due in years we have low liabilities rather than in years where we have high liabilities.”

Picking up on the analogy, Mr Rehn joked: “As of today, Ireland will be the land of the green valleys.”

While the deal was part of a series of initiatives helping Ireland move out of the bailout, it would “not significantly” help with budgetary pressures “in the early years”, he accepted.

Eurozone ministers initially agreed to the proposals – with a similar deal for Portugal – during the afternoon at the informal Ecofin gathering in Dublin.

Other EU finance ministers from outside the Eurozone, including Chancellor George Osborne, signed up to the agreement later on.

Some national parliaments in other member states, including Germany, will also have to rubber-stamp the proposals over the next 10 days.

Mr Rehn said it was another very important step for Ireland to return to normal borrowing from the international money markets.

But he warned that the country must stick to the agreement under the terms of the economic rescue package.

The summit was the first meeting of all 27 European finance ministers since Cyprus was hit by its banking crisis.

The Ecofin meeting was regarded as “rather low key from a UK perspective”, according to one Treasury source.

Wider discussions focused on banking union – specifically on the eurozone-wide banking supervisor which is being set up but does not affect operations in the UK.

Cyprus has agreed to a €10bn bailout with the IMF and eurozone partners but it will see savers with two of the country’s biggest banks incur hefty losses as part of their contribution to the total package.