EU ministers divided over Irish bailout interest rate

28th November 2010, Comments 0 comments

Europe's finance ministers met Sunday to thrash out details of Ireland's 85-billion-euro (113-billion-dollar) bailout, but France's representative said they were still divided over the interest rate to be charged on the loan.

Sunday's emergency meeting in Brussels is aimed at preventing Ireland's debt crisis from spreading to other countries in the 16-member eurozone, with experts declaring that Portugal and Spain are also vulnerable.

"We still have a few little details in the composition to rework and to finalise, particularly on the interest rate," said French Finance Minister Christine Lagarde as she arrived for the meeting.

Media reports suggesting Ireland might be charged 6.7 percent interest over nine years have sparked anger in Dublin.

That rate would be significantly higher than the 5.2 percent charged to Greece as part of a 110-billion-euro bailout earlier this year and would be "unacceptable", Ireland's Finance Minister Brian Lenihan said.

Lagarde however said the bailout plan "is almost wrapped up. I believe the end of the negotiations are in sight."

Agreement in principle was reached at international negotiations in Dublin on the package, from which 35 billion euros would go to Ireland's shattered banking sector, a diplomat close to the negotiations said earlier.

To add to the drama, an EU spokeswoman said Lenihan, a central figure in the negotiations, had been delayed by bad weather in Dublin and would be late for the start of the 1:00 pm (1200 GMT) meeting, but was on his way to Brussels.

However it was clear before the meeting began that the fallout from Ireland's crisis, and its implications for vulnerable economies like Portugal and Spain, would be high on the agenda.

EU Economic Affairs Commissioner Olli Rehn said "the wider ramifications of the current crisis" would have to be tackled.

"We have to discuss a systemic response to this crisis. We are facing a very serious situation. We have to do our best to protect the foundations of the economic recovery and employment."

Belgium's minister Didier Reynders said "the eurozone must react and defend its currency. We must take every possible measure, which in the future will enable us to stand firm when there is turbulence."

The deal comes a day after mass street protests in Dublin against the Irish government's austerity cutbacks, and with a poll showing a majority of Irish people think the country should default on its debts rather than succumb to prohibitive conditions.

It is Europe's second bailout this year, after the aid granted to Greece in May, with experts predicting more to come in Portugal, Spain and elsewhere despite politicians' denials.

Spain's minister Elena Salgado said she was attending the meeting "only to speak about Ireland" amid questions about market pressure on Madrid.

The Brussels meeting is being joined by non-euro nations Britain, Sweden and Denmark, which have offered direct bilateral loans to Dublin.

A full meeting by the 27-member bloc was set to seal the bailout later Sunday in an agreement timed to ease fears for the euro ahead of the reopening of Asian financial markets in the early hours of Monday.

Irish Prime Minister Brian Cowen has been fighting off calls from opposition lawmakers to quit over his handling of the economy, with the country's deficit this year hitting 32 percent of output.

Cowen unveiled a four-year austerity plan last week as a prerequisite to securing the bailout.

The plan also involves cuts to 25,000 jobs, public sector pay, pensions and social welfare in a bid to slash a huge deficit and save 15 billion euros by 2014.

Tens of thousands of people took to the streets of Dublin on Saturday in an angry protest at what many believe to be the government's prioritising of the interest of the banks over the interests of ordinary taxpayers.

Ireland's banks were left exposed by the global financial crisis and the collapse of a domestic property bubble.

Some waved placards reading "Eire not for sale, not to the IMF" and "There is a better, fairer way", denouncing the bailout and calling on Cowen to quit.

On Friday, voters dealt Cowen's Fianna Fail party a humiliating by-election defeat, cutting the FF/Green Party coalition's parliamentary majority to just two.

© 2010 AFP

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