Noonan ups campaign over early repayment of IMF loans

Minister for Finance Michael Noonan will lobby finance ministers of the 27 other EU member states at meetings in Italy on Friday and Saturday in an attempt to garner political backing for the refinancing of Ireland’s IMF bailout loans.

In Brussels yesterday, after meeting interim EU economics commissioner Jyrki Katainen, Mr Noonan said he was confident there were "no divisions" between member states on the issue, but the outcome of the discussions was "too close to call".

“We have a distance to go. The decision is vested in the political side and, even though I believe I will have the support of the institutions, I need the individual support of each of the 27 ministers,” he said.

Ireland is seeking to repay up to €18 billion of its €22.5 billion loan from the IMF early, in a move that could save the State up to €400 million a year. Under the terms of the bailout, however, a

decision to restructure the loans must apply to all creditors.

Legal concerns

Sources in Brussels yesterday suggested there was broad support from the European Commission and legal concerns had been allayed.

“There are neither legal concerns nor economic concerns. What is still outstanding is the political evaluation of the issue,” said a senior euro zone source yesterday.

The arrangement must receive the blessing of the euro group of euro zone finance ministers and all 28 European Union finance ministers.

The European Central Bank is also increasingly concerned about the pace at which the Irish Central Bank has off-loaded long-term bonds used to replace the Anglo Irish promissory notes last year, amid concerns that the arrangement comes close to monetary financing.

Promissory note

While the ECB cannot veto any decision to restructure the IMF loans, technically it could initiate legal proceedings over the promissory note deal via the European Court of Justice. Mr Noonan said yesterday there was “no link” between the IMF discussions and the promissory note deal.

He added that, while he expected the issue of the bonds underpinning the promissory notes to be discussed during his meeting with ECB president Mario Draghi today in Frankfurt, the decision to sell the bonds was one for the Irish Central Bank and not for him.

Refinancing the IMF loans could take 18 to 24 months, with the NTMA expected to refinance the loans in tranches of up to €5 billion depending on market conditions.

A key condition of political support for the deal from European lenders is that the IMF retain an involvement in Ireland’s post-programme surveillance, even after most of its loans have been paid off.