AUSTRIAN finance minister Josef Proell warned yesterday that Ireland will have to give ground if it expects Europe to reduce the punitive 5.8 per cent interest rate it is paying on its €85bn (£74bn) bailout funds.
“If Ireland wants anything, it has to deliver something. Greece showed that,” said Proell at a meeting of Eurozone finance ministers (known as ECOFIN). “Ireland must say now what it wants and... what it can give.”
His comments will inflame sentiment in Ireland, where voters were angered by French president Sarkozy’s demand that the country raise its low 12.5 per cent corporate tax rate in order to qualify for any relief on its debt interest. New Irish Prime Minister Enda Kenny flatly refused the demand.
Newedge bonds strategist Bill Blain said: “Picking a fight with the Irish by threatening their sovereignty, or making demands they can’t possibly back away from, is never a positive thing. They can be quite belligerent.”
Eurozone leaders pointedly restructured Greece’s €110bn debt but not Ireland’s on Saturday, cutting interest on Greek’s bailout funds by one per cent and extending its maturity by 3.5 years.
Observers still think that Greece and Ireland run high risks of default, however.
ECOFIN announced yesterday that it will agree on the details of how it will boost the Eurozone’s main bailout fund by next week.
They agreed on Saturday to increase the fund’s ability to lend from €250bn to its full €440bn, but did not specify how this would be achieved while maintaining its AAA rating.
EU?leaders also agreed to strengthen the Stability and Growth Pact, mandating that indebted countries front-load fiscal consolidation and increase competitiveness by increasing the efficiency of their labour markets.