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New bailout deal saves Ireland €900m a year - Noonan

Michael Noonan tells the Oireachtas finance committee that the new interest rate will apply to loans already borrowed.

THE REVISED TERMS of Ireland’s EU-IMF bailout deal negotiated by European leaders last week will save Ireland around €900m a year, finance minister Michael Noonan has revealed.

Speaking to the Joint Oireachtas Committee on Finance this afternoon, Noonan added that the reduced interest rate – which will be around 2 per cent lower than previously indicated – would not only apply to future Irish borrowing, but also to the €17bn the Exchequer has already drawn down.

Not only will the lower rate apply to the European Financial Stability Fund – the bailout mechanism funded by each of the 17 Eurozone members – but Noonan said he had been given informal assurances that the reduction will also apply to the European Financial Stability Mechanism, which is funded by all member states.

Lower rates will also apply to Ireland’s bilateral loans with Britain, Denmark and Sweden, Noonan added. Britain had already agreed to reduce its interest rate to slightly below that charged of the EFSF, while the terms of loans from Denmark and Sweden have yet to be agreed.

The final interest rate has yet to be agreed upon, but Noonan said it should be almost exactly the rate paid by the EFSF to borrow the loans itself – which was around 2.8 per cent when the EFSF issued bonds to fund Ireland’s bailout in January.

The IMF’s portion of the loans being offered to Ireland, which totals €22.5bn of the overall bailout, will remain at just under 6 per cent for the time being, Noonan added.

That rate would remain fixed until next year, when two-thirds of the IMF’s member states would vote to recategorise Ireland and give it a different interest rate.

The €900m savings does not include whatever prospective savings could be made from a reduction to the IMF’s interest rate.

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While Ireland had agreed to “engage constructively” in discussions on a common consolidated corporate tax base, Noonan said this was not a new concession and that Ireland was not opposed to greater cooperation with its EU partners.

Only by involving itself in discussions, Noonan said, “can we be absolutely sure that all the arguments that favour our position will be brought to the table.”

This afternoon’s meeting took place in the Dáil chamber itself, as part of moves to allow other TDs to attend and to allow as many TDs as possible to attend.

About the author:

Gavan Reilly

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