MINISTER FOR Finance Michael Noonan has said Ireland and other bailout recipients should be given a lower rate of interest on bailout loans than the rate on the table in the Government’s contentious talks with France and Germany.
Widening the argument for a rate cut, Mr Noonan said it was important for the European authorities to ensure the success of their bailout policy.
“In my view at the minute Europe needs a win; we’re having a euro crisis every three weeks at the moment,” he told reporters.
Mr Noonan questioned why non-euro countries could borrow from the European Commission at half the rate applicable in the Irish bailout. He also queried the approach of France and Germany in their demand for corporate tax concessions from Dublin in exchange for an interest rate cut.
With the leadership of the IMF expected to change following sexual assault charges against its chief Dominique Strauss-Kahn, Mr Noonan said he favoured a European candidate if the vacancy arose.
This would be in Ireland’s interests, he said. “The way I look at it is [that] while we’re in a programme where the IMF is a very active partner, somebody who comes from the euro area understands the issues better than say somebody who would come from another region of the world.”
In Brussels for two days of talks with EU counterparts, the Minister said the Strauss-Kahn affair and the Greek financial crisis meant the Irish interest rate was not core to the talks.
“This week wasn’t a good time for bilaterals with the French minister. She’s a bit preoccupied with events elsewhere,” he said.
The Minister insisted, however, that Ireland would not surrender its “vital interests” for a cut in the interest rate.
“I don’t want to over-emphasise it; it seems to me that the interest rate reduction won’t make or break us, it won’t make or break the programme,” Mr Noonan said.
The stance of Paris and Berlin in their pursuit of a quid pro quofor lower loan costs was "not the smartest way" of ensuring the euro zone bailouts succeed.
“I was emphasising yesterday in the general context that a failure in any of the programmes is going to be very bad for the euro zone and a successful programme is not only a success for the individual country who is the recipient of the programme but a big success for the euro zone.”
Ministers resolved to initially levy a lower charge for Portugal’s loans than on Ireland’s loans. The rate is calculated by adding a fixed “surcharge” above the borrowing costs of the two European funds from which Ireland and Portugal are drawing aid.
Ireland pays an average surcharge of 2.95 percentage points but Portugal will pay between 2.08 and 2.15 percentage points.
Although a 1 percentage point cut in the Irish surcharge is on the table in the stand-off with France and Germany, Mr Noonan said a deeper cut should be made.
“If you look at it objectively, the add-on above market rate is too high and it would help all the recipient countries if the pricing was brought down.”
