A NEW finance mechanism would mean Ireland paying a higher interest rate in some of the EU money it was borrowing, Taoiseach Brian Cowen told the Dáil.

“The simple reason is that this is the first time the mechanism has been used as a lender of last resort, working with other international organisations that are providing the cheapest form of international credit available to the IMF,” he said.

Mr Cowen was replying to Labour leader Éamon Gilmore, who said an RTÉ report had confirmed that the EU would be borrowing money on its triple-A rating and would then make that money available to Ireland, but at 3 per cent higher than the rate at which it was borrowing.

“In other words, it will be making a profit of 3 per cent on the money it is lending to Ireland,’’ Mr Gilmore added.

He said that if the entire amount of €22.5 billion was drawn down from that fund, the cost to Ireland of the additional interest charged by the EU would be close to €5 billion over the loan’s lifetime.

Mr Gilmore said that when the Government sat down to negotiate the deal with the EU institutions, the arrangement it made was to provide financial assistance to Ireland, but it was also designed to support the euro and provide financial stability within the European system.

Mr Cowen said that if the Government had gone to the international market for the money, Ireland would be paying a far higher rate than what was available from the European Financial Security Mechanism and the International Monetary Fund.