Bailout deal 'to save Ireland €900m'

Minister for Finance Michael Noonan said today the recent changes to the interest terms on the Irish bailout deal could result in savings to the State of about €900 million.

Speaking in the Dáil at the Joint Oireachtas Finance Committee this afternoon, the Minister said he does not yet know “to the exact decimal point” the precise reduction in interest rate Ireland will receive from last week’s agreement by European leaders.

However, it will be “significantly reduced” to a rate close to the cost of funds for the European Financial Stability Facility (EFSF), he said.

Mr Noonan said the precise details are yet to be settled. “For the moment, we are working on the basis that this amounts to a reduction of around 2 percentage points in the rate which we borrow from this facility,” he said.

Mr Noonan said that with a 2 per cent reduction applying to all future interest payments on loans with an average maturity of 7.5 years, the saving would be about €900 million.

Mr Noonan told about 30 TDs and Senators attending the committee meeting – which was held in Dáil chamber to allow as many Oireachtas members as possible attend – that the new rate will apply not only to monies yet to be drawn down, but also to future interest payments on existing loans.

“If the cost of the money goes down, you get a bigger break,” Mr Noonan said. “If it goes up you get a different rate. It’s complicated enough in the way they make it up. It will not be below the cost of the funding.”

Mr Noonan said lower rates will also apply to Ireland’s bilateral loans with Britain, Denmark and Sweden.

The EU leaders could not make a formal decisions on the issue because funding from the EU commission is supported by all 27 members rather than the 15 members of the euro zone, but he expected that it would be formally agreed by all.

The Minister also emphasised that Ireland conceded nothing on talks about a consolidated European tax base.