Dáil Éireann Debate, Thursday - 22 September 2011
68 Deputy Michael McGrath asked the Minister for Finance the estimated savings for Ireland, for each of the years 2012, 2013 and 2014, arising from the anticipated reduction in the interest rate on funds available from the European Financial Stability Fund, European Financial Stability Mechanism and the bilateral loans; the interest rates he expects Ireland will now be charged; and if he will make a statement on the matter. [25497/11]
Amharc ar fhreagra69 Deputy Michael McGrath asked the Minister for Finance when the interest rate reductions on funds drawn down under the European Financial Stability Facility and the European Financial Stabilisation Mechanism will take effect; the date to which they will be backdated; the estimated saving for Ireland in 2011; and if he will make a statement on the matter. [25498/11]
Amharc ar fhreagraI propose to take Questions Nos. 68 and 69 together.
Not all the details are finalised yet, so the following figures could change. However, I am informed by the NTMA that, on reasonable assumptions, projected estimated savings from the EFSF and EFSM, including the bilateral loan from the UK, from 2011 to 2014 on a General Government Balance basis are as follows:
|
Year |
2011 |
2012 |
2013 |
2014 |
|
€m |
365 |
875 |
1,110 |
1,180 |
In general, for the EFSF and EFSM, the actual interest rates charged will be based on the cost of funds which they experience in the capital markets and are subsequently passed on to borrowing Member States.
All of the details governing the reductions in the various interest rates have not been finalised. The European Commission has adopted proposals that the maturity of the loans Ireland will receive from the EFSM will be increased from the current weighted average life of 7½ years to 12½ years. Loans from the EFSF are expected to have a minimum maturity of at least 15 years and the details of how this will be achieved have not yet been agreed. These longer maturities will, on balance, have significant benefits for Ireland but the change in maturities will also affect the interest rate charged.
As regards the effective date for the reductions and the issue of backdating, the position by funding source is set out below:
EFSM — The Commission has adopted a proposal to amend the Implementing Decision 2011/77/EU on granting Union financial assistance to Ireland that would reduce the margin of 292.5 basis points to zero and apply it to all loans. It is expected that this proposal will be presented for approval at the ECOFIN meeting on 4 October 2011.
EFSF —In the first instance, the Amendment to the EFSF Framework Agreement must be ratified by all euro-area Member States. The European Financial Stability Facility and Euro Area Loan Facility (Amendment) Bill 2011 was before the Dáil on Tuesday and Wednesday of this week and scheduled to be considered by the Seanad today. When it is enacted, Ireland will confirm its ratification of the Amendment to the EFSF Framework Agreement. Several other Member States have already ratified it and the rest have agreed to complete their national procedures by early to mid October. Once it has been ratified by all Member States, our Loan Facility Agreement will be amended to implement the interest rate reduction and provide for longer maturities. This requires the unanimous consent of all Guarantor Member States.
The issue of whether or not the reduction in the interest rate on EFSF loans would apply to tranches already disbursed was discussed during the recent informal meeting of Finance Ministers in Poland. Following that discussion, I announced that it would apply to all loans including the one already disbursed to us in February 2011. However, I also explained that the prepaid margin we had to incur upfront could not be returned to us until the loan matures in July 2016. It should be noted that the Amendment to the EFSF Framework Agreement does away with the need for prepaid margins on future loans.
Bilateral loans:
The UK has already announced that it will reduce the margin on its loan to Ireland to be in line with that of the EFSF. It is expected that this will be implemented at around the same time as the other reductions take place. The first drawdown under our bilateral loan agreement with the UK will take place shortly
Sweden and Denmark — the loan agreements are yet to be finalised.
