Irish IMF-Loan Plan Seen Avoiding Objections, Official SaysRebecca Christie and Joe Brennan
Ireland’s campaign to repay early most of its debts to the International Monetary Fund probably won’t face objections or legal obstacles, a European Union official told reporters in Brussels today.
Ireland’s request to repay a portion of its 22.5 billion euros ($29 billion) of IMF loans will be reviewed by euro-area finance ministers this week, said the official, who asked not to be identified because of EU briefing policy. An early repayment would improve the nation’s finances and benefit EU creditors, the official said, adding that a decision isn’t imminent.
“We can get money on the market now at less than 2 percent,” Finance Minister Michael Noonan told reporters in Brussels today, after meeting European Commissioner for Economic and Monetary Affairs Jyrki Katainen to discuss the matter. The rate on most of the IMF loans is almost 5 percent, he added.
To push ahead with the plan, Noonan needs the EU to waive its right to be repaid at the same pace as the IMF, which may be politically difficult for some governments. Seeking to build support, he will meet Jeroen Dijsselbloem, who heads the euro-area finance ministers’ group, and European Central Bank President Mario Draghi tomorrow.
“Mr Katainen indicated that he was in principle very supportive of Ireland’s plan to pursue measures that reduce our debt-service burden and improve our debt sustainability and that he was looking forward to receiving more details to allow for a comprehensive assessment of the plan,” Noonan said in an e-mailed statement after the meeting.
The loans from the Washington-based IMF carried an effective 4.99 percent interest rate at the end of March, 1.93 percentage points more than the most expensive EU funds, from the European Finance Stabilization Mechanism, according to the finance ministry.
Noonan said on July 28 that Ireland could save about 375 million euros a year refinancing 15 billion euros of its IMF loans at prevailing market rates. Ireland’s benchmark 10-year bond has fallen to 1.61 percent from a peak of over 14 percent in 2011.
Some states, such as Germany, will have to put any proposal on Ireland repaying its IMF loans to parliament, he said, adding that “there’s a willingness” politically to put the matter before lawmakers in Berlin.
“We have a distance to go yet, and the decision is vested in the political side,” Noonan said.