Minister now says any interest rate reduction will only apply to funds not yet drawn down (giving an anticipated saving €150-200m p.a and not the €450m p.a previously stated)
The Minister for Finance Michael Noonan has given the clearest signal yet that the reduction in the interest rate paid on the EU side of the EU / IMF loan facility is now as far away as ever with the Minister having no progress to report on the issue at all.
Fianna Fáil Spokesperson on Public Expenditure and Financial Sector Reform Michael McGrath TD said the Minister also revised the estimated saving from an interest rate reduction from €450m per annum to €150-200m per annum by revealing, for the first time, that any reduction in the rate will only apply to funds not yet drawn down.
“The admission by Minister Noonan that any interest rate reduction on the EU side of the loans will only apply to funds not already drawn down is very concerning. According to some reports, Ireland has already drawn down a third of the external loan facility. The Minister is effectively telling us that the government has failed to secure any reduction on the funds already drawn down.
Let’s compare the following statements which are only a month apart:
Minister Noonan’s written Dáil reply to Deputy McGrath 3 May 2011:
“The actual savings that would arise from any interest rate reduction secured would depend on the total amount of funds dawn down from the EFSM and the EFSF and on the maturity profile of any such loans. The total amount of funding available from the EU and IMF is €67.5 billion, and €45 billion of this comes from the EU through the EFSM, the EFSF and the bilateral loans. For illustrative purposes, the saving arising from a 1% reduction on the interest rate charged on the full €45 billion available from EU sources would be €450 million for each full year borrowed. If this €45 billion was held for an average 7.5 years, i.e. the term envisaged in the programme, the total saving would amount to €3.375 billion.”
Minister Noonan’s oral reply to Deputy McGrath in the Dáil, 7 June 2011:
‘The value of the (interest rate) reduction is being exaggerated and, in my view, too much is being made of this………If Ireland were to get the same as Portugal, it would mean €148 million a year, and if we got what Greece is supposed to have got but may not retain next month, the figure would be just over €200 million. I do not believe the Deputy’s figures (€450m per annum) are correct. The concession, or arrangement, is that the reductions for Greece and Portugal did not apply to money already drawn down – only to that going forward. Therefore, the Deputy’s figures are much greater than that for the actual available reductions.
Deputy McGrath stated: “In the face of stiff opposition from certain quarters in Europe to an interest rate reduction for Ireland, Minister Noonan is now seeking to downplay the importance of Ireland securing this reduction. This is a far cry indeed from the rhetoric we heard from Fine Gael and Labour prior to and during the election.
‘’According to weekend media reports, Ireland has already drawn down €23bn of the €67.5bn available from external sources under the EU / IMF Programme. This is in excess of one third of the external loan facility.
‘Is the Minister now informing the country for the first time that securing an interest rate reduction on funds already drawn down is not going to be achieved?
‘I am calling on the Minister to clarify the expected savings for the State from an interest rate reduction on the European sources of funding under the EU / IMF deal, and to give an answer, which he refused to do in the Dáil today, as to when we will know whether any interest rate reduction at all will be secured.’
‘The Fine Gael / Labour promise to renegotiate the EU / IMF deal in a meaningful way is being exposed more and more as a sham with each passing day,’ stated Deputy McGrath.