The Taoiseach Enda Kenny has conceded that due to the failure of his Government to secure the application of an interest rate reduction to the EU side of the EU/IMF loan facility that almost half the EU loans being received by Ireland will never have the interest rate on them reduced.
The Taoiseach has told the Dáil that €15.6bn has to date been drawn down from the EU and that “any interest rate reduction would apply in respect only of the remaining moneys of €24.6bn.” The total amount available from EU sources (including bilateral loans) under the programme is €45 billion. Therefore, the Taoiseach has now conceded that no interest rate reduction will apply to over 45% of these funds from EU sources.
Fianna Fáil Spokesperson on Public Expenditure and Financial Sector Reform Michael McGrath TD said: “It now clear that the failure of this Government to have the ‘agreed’ interest rate reduction applied is costing Ireland dearly.”
“The Minister for Finance Michael Noonan has already revised the estimated saving from an interest rate reduction from €450m per annum to €150m per annum. It is clear now that as a result of stiff opposition from certain quarters in Europe to an interest rate reduction for Ireland, Minister Noonan is now seeking to downplay its importance to the Government. I welcome the Taoiseach’s comment today that he intends to raise this at the next EU leaders meeting despite repeatedly telling the Dáil that it was within the remit of Minister Noonan.”
It is worth remembering the comments of Minister Michael Noonan comments of March 23rd last:
“It’s actually agreed by the 27 [EU member states] that there’ll be a 1% reduction, and then we have the interventions of what quid pro quo Ireland will give, but there’s actually no quid pro quo written into the communiqué…. So I would hope this would be resolved in the coming weeks.”
Deputy McGrath concluded: “The Government must redouble its efforts and strengthen its resolve to have the agreed interest rate reduction applied to Ireland. The Government also needs to answer why an interest rate reduction cannot be applied to the full €45 billion available from EU sources. The Government has not previously told us that funds already drawn down would not benefit from a rate reduction. There are serious questions for the Government to answer on this issue.”
On May 3rd Minister Noonan’s wrote in a Dáil reply to Deputy McGrath regarding the savings that would be achieved through an interest rate cut:
“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.”
On June 7th Minister Noonan’s oral reply to Deputy McGrath was:
‘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.