Ireland to tap €2bn of EU rescue fund
As few as 200 Irish companies are likely to avail of loans totalling €2bn from the much-vaunted €500bn package to rescue European economies from the Covid-19 crisis — far short of the huge amounts of liquidity that businesses here require, say experts.
Marathon talks late last Thursday saw EU finance ministers agree a compromise deal to provide loans to all businesses across the EU and to allow access for the worst-hit countries such as Italy to access the European Stability Mechanism — which was used by Ireland in the 2010 bailout.
Finance Minister Paschal Donohoe said yesterday the Government would likely avail of only one of three parts of the €500bn package by tapping new loans through the European Investment Bank (EIB) designed to create lending of up to €200bn for small firms across Europe, because the State already has access to almost zero debt through sovereign debt markets.
However, it has emerged that Ireland may likely secure an allocation of €2bn or €3bn of the EIB-guaranteed fund, which implies that as few as 200 Irish middle-sized companies would likely benefit from the package.
Welcoming the initiative, Ibec director of policy Fergal O’Brien said the EIB or the Government would cover the riskiest parts of the loans, helping banks to leverage up the amount of lower-cost loans available for businesses.
However, he estimated that the new loans would amount to just a tenth of the liquidity that Irish mid-sized companies require.
“It is another important step, but we need to keep the shoulder to the wheel to reach what we think is that target, which we think is between €20bn and €30bn in liquidity that we need for the economy,” he said.
- Shop for essential food and household goods;
- Attend medical appointments, collect medicine or other health products;
- Care for children, older people or other vulnerable people - this excludes social family visits;
- Exercise outdoors - within 2kms of your home and only with members of your own household, keeping 2 metres distance between you and other people
- Travel to work if you provide an essential service - be sure to practice physical distancing
The new EIB loans are similar to a British scheme announced last month.
Economist Jim Power said the three-part package was an “underwhelming” response to the crisis, and he expected the EU would need to do much more.
“It is a step in the right direction, and Europe will have to do a lot more in the next few months,” he said. “It is the beginning of the process.”
Andrew Kenningham, chief Europe economist at Capital Economics, said the eurozone’s package “falls a long way short of the large-scale joint fiscal boost many eurozone governments had argued for”.
“Die-hard optimists will point out that the statement says the group has also agreed to work on a recovery fund for the post-crisis period,” he said.
