THE EUROPEAN COMMISSION has said that any failure by Ireland to ratify the Fiscal Compact deal in a public referendum will not mean that Ireland cannot access the loans already guaranteed under the current bailout.
This is despite the fact that the current European bailout fund, the European Financial Stability Facility (EFSF), is to be superseded by the European Stability Mechanism in four months – with access limited to countries which are part of the deal.
A spokesman for commission president Jose Manuel Barroso this afternoon told TheJournal.ie, however, that the European Financial Stability Facility will continue to exist after July and that Ireland will still be able to draw down the funds agreed under the current bailout.
“The EFSF will remain fully operation until the end of June 2013,” the spokesman said. “In any case, for existing programmes and all existing commitments, it will continue to be able to deal with those.”
The spokesman said that although the EFSF would not be engaging in any new lending after July – with the exception of the deals for Greece, Portugal and Ireland which have already agreed – it would remain in existence so that it could collect repayments from those countries.
“It won’t make any new commitments, but will continue to deal with existing commitments,” the spokesman said, affirming:
Whatever happens in the referendum… will not affect the current programme.
Under the terms of the Fiscal Compact deal, which will take effect as soon as twelve countries have ratified it, access to emergency funding from the European Stability Mechanism will only be permitted if a country has already signed up to that deal.
This means that if Ireland was to vote No, it will not have access to a European bailout fund in future – meaning it would have to look elsewhere for funding if it was not able to afford the interest rates being demanded by the regular markets. Ireland hopes to return to these markets next year.
The ESM is set to supersede both the EFSF and the European Financial Stability Mechanism, the European Commission’s centralised lending body, later this year.
The Oireachtas will be required to vote before then on whether Ireland should ratify the ESM, which is being created by a new separate European treaty.
Between them, the EFSF and EFSM supply around €40 billion of Ireland’s €67.5 billion bailout programme, with the IMF providing €22.5 billion and another €5 billion or so coming from bilateral agreements with the UK, Sweden and Denmark.