IRELAND is likely to take a loan worth tens of billions of euros from the International Monetary Fund and European partners to prop up its banking system, the troubled country’s banking chief said yesterday in the first official confirmation that a bailout is imminent.
Central bank governor Patrick Honohan said “we are talking about a very substantial loan for sure – tens of billions, yes,” when asked about the rescue package.
“The intention is and the expectation is, on their part and personally on my part, that negotiations or discussions will be effective and a loan will be made available and drawn down as necessary,” he added.
Experts from the European Commission, the European Central Bank and the IMF met at the Irish central bank yesterday to discuss the possible rescue package, with discussions set to continue into next week.
Finance minister Brian Lenihan said in parliament that the embattled government had not formally asked for a loan, and the amount needed was currently unknown. Estimates yesterday ranged from €80bn (£68bn) to €110bn.
“The banks themselves can’t put a figure on the residential debt, and the figure has been going up and up over the last two years,” WorldSpreads chief executive Conor Foley told City A.M. last night. “Based on our estimates of the banks’ debts, the amount needed won’t be less than €80bn.”
The government would not be coerced into altering its 12.5 per cent corporate tax rate as part of a bailout deal, Ireland’s deputy Prime Minister Mary Coughlan said yesterday.
French and German officials are thought to be pressing Ireland to raise the attractive rate, but Coughlan told the Irish parliament: “It’s non-negotiable.” Lenihan said on Wednesday the country’s tax policy was protected under the EU’s Lisbon Treaty.
Irish employers’ group IBEC backed the government’s firm stance. “Any change in the corporate tax regime would be counterproductive to the collective efforts to reduce the budget deficit,” said director general Danny McCoy. “Ireland is a small, open trading economy and the recovery will come from enterprise. It is vital that the ability of Ireland’s enterprise sector to drive growth and recovery is not undermined in any way.”
David Cameron said he has not ruled out a direct UK contribution to Ireland’s coffers, telling a House of Commons committee yesterday that Ireland is “a close neighbour, a good friend, a country that we have very close political and economic relations with?.?.?.?Our banks are very connected to the Irish banks. We have an interest in not just the Eurozone being a success, we have an interest in Ireland being a success.”
After 10 days of losses, European stock and bond markets and the euro rebounded yesterday on expectations Ireland would become the second Eurozone country after Greece to receive a bailout.
Ireland’s cost of borrowing, which is close to an 11-year high, fell as worries of a sovereign default eased. Yields on 10-year gilts dropped from 8.3 per cent to 8.1 per cent yesterday.