Dáil Éireann Debate, Wednesday - 12 January 2011
281 Deputy Martin Ferris asked the Minister for Finance if it would be possible for this Government, or an incoming Government, to renegotiate the interest rate on the funding made available from the EU as part of the recent EU-International Monetary Fund package; and if he will make a statement on the matter. [1320/11]
View answerIt is important to understand that while there has always been the possibility under the EU-IMF Programme for this Government or any new Government to substitute alternative measures within the programme where they are as economically efficient and of equal fiscal effect and that the agreed size and speed of the budgetary adjustment is maintained, the position in relation to the interest rate charged is different. The interest rate for funding from the IMF and the various EU funding lines were determined by a common approach for any borrower. Accordingly, any changes to these rates cannot be negotiated for Ireland in isolation and must be seen in the wider context. We must bring realism to the debate about our financial difficulties. I agree with recent comments in this regard by the Governor of the Central Bank, Professor Honohan to the effect that there must be "a clearer understanding of what is possible and what is not possible to be done".
It is important to note that the (blended) interest rate on the loans to be provided to Ireland is at a far lower cost than would be available to Ireland in the financial markets. It is designed to avoid overburdening the Member State concerned or acting as an impediment to economic growth while at the same time providing an incentive to return to the markets. At present the yield on Irish government bonds is just below 9% in the secondary markets. We will not be obliged to drawdown any of these loans if there is an opportunity to return to the markets at sustainable rates or we can access funds at lower cost elsewhere.
