Ireland says eurozone deal will slash its interest bill

22nd July 2011, Comments 0 comments

The new eurozone debt plan will save Ireland hundreds of millions of euros in interest payments on its rescue loans, the government said on Friday, welcoming agreement at a summit on Thursday.

"(Thursday) was a very good day. We have prolonged the period of repayment (on loans) and we have significantly reduced the interest rate that is being charged upon us," Public Expenditure Minister Brendan Howlin said.

The government had made winning a lower rate on its debt rescue payments a central objective but had run into strong pressure to raise the 12.5-percent rate of Irish corporation tax, seen as predatory by some other EU countries, notably France.

Ireland argued that the tax was standard, did not differ greatly from effective tax rates applied in other countries once allowances had been factored in, and was vital to its recovery precisely because it attracted investment.

Howlin said that the average borrowing period on Ireland's bailout loans had been about seven years and the new agreement would more than double the payback time to 15 years.

The summit, held essentially to arrange a second rescue for Greece and prevent the crisis in the from worsening, also eased loan conditions for Ireland and Portugal who have both been bailed out by the EU and International Monetary Fund.

"So that is extremely positive. We are determined to get back into normal borrowing for the state," Howlin said.

"If we can prolong, as we have now agreed to, the paying back of the lump of money that we have borrowed, will be borrowing, under the programme it clearly makes it more possible for us to get back into normal bond borrowing earlier."

Howlin told RTE state radio the issue of interest rate reduction on loans was complex as there were a number of sources of funds involved with the EU-IMF bailout.

There are bi-lateral loans with Britain, Sweden and Denmark and Howlin said he expects that the summit deal on the interest rate reduction would apply to both European funds and the bi-lateral loans.

Britain announced late on Friday that it would cut the rate of interest on its its £3.26 billion loan to Ireland.

Finance minister George Osborne said that easing the pressure on Ireland was in Britain's national interest -- and welcomed the eurozone summit deal.

"I've been arguing for some time that the interest rates charged for eurozone loans were too high. I'm pleased therefore they have now reduced those rates," Osborne said.

"That enables Britain to cut its rate on its loan to Ireland, while ensuring all of the benefit goes to Ireland and not to higher interest rates paid to euro area governments. We will still be more than covering the cost of our borrowing.

"We stayed out of the Greek bailout as promised. But, for Britain, Ireland is a special case. Our loan will help them and (it) is in our national interest."

© 2011 AFP

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