May 16, 2011

IMF Approves €1.58 Billion Bail Out Loan For Ireland

The Irish Times
written by Arthur Beesley
Tuesday May 17, 2011

THE INTERNATIONAL Monetary Fund yesterday praised the Government’s efforts to dig Ireland out of the economic crisis and said it was disbursing another $2.24 billion (€1.58 billion) of loans to it after reviewing the country’s performance.

“Ireland is making progress in overcoming the worst economic crisis in recent history,” said the IMF. With the latest disbursement, Ireland will have received about $10.19 billion from the IMF under the joint loan programme with the EU.

Deputy IMF managing director Naoyuki Shinohara said Ireland had made “a strong start” at righting its economy since the programme was put in place late last year.

“Resolute policy implementation by the authorities has kept the program on track during a period of political change and an unsettled external environment,” Mr Shinohara said.

The IMF said Ireland was on track to meet its 2011 fiscal adjustment targets and said the new Government was committed to a medium-term fiscal consolidation that will help achieve the goals set for it under the loan programme.

Meanwhile, Minister for Finance Michael Noonan arrived in Brussels for two days of talks on the financial crisis. He pressed for a long-awaited cut in the cost of the Irish bailout yesterday as EU ministers prepared to levy a lower interest charge on Portugal’s rescue loans than on Ireland’s loans.

The talks between the ministers continued as the IMF announced it was disbursing another $2.24 billion (€1.58 billion) of loans to Ireland after reviewing the country’s performance. “Greece has got a lower interest rate already and that will be endorsed. Portugal are still negotiating,” he said. “The expectation is that they will get a lower interest rate.”

While EU ministers signalled their formal approval of the €78 billion Portuguese bailout in during the evening, they did not make public the interest rate. However, the “margin” on Portugal’s loans was expected to be around 0.75 of a percentage point below the 2.95 percentage point fee which applies to Ireland’s bailout.

The margin is levied above the borrowing costs of the euro zone bailout fund, the European Financial Stability Facility, and the European Commission’s rescue fund, the European Financial Stability Mechanism.

The commission is considering an application from Mr Noonan to extend the eligible liabilities guarantee scheme for the banking sector for six months from July.

However, Mr Noonan said the guarantee was not on the agenda for the meeting.

The top item for discussion was the troubled Greek rescue, but those talks were overshadowed by sex assault charges against IMF chief Dominique Strauss-Kahn.

Without naming France or Germany, Mr Noonan said “some individual countries” were looking for further conditionality from Ireland in return for a rate cut. He also made it clear he did not anticipate the Irish interest rate would be settled at the talks.

However, he expected his counterparts to formally endorse Ireland’s revised memorandum of understanding with the EU-IMF troika. “The focus isn’t on Ireland today. Ireland is on the agenda . . . There will be no problem with endorsement.”

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