Dublin, 14 September 2011: European Movement Ireland today welcomes the two proposals adopted by the European Commission, suggesting reduced interest rate margins and extended maturities for loans granted by the European Union (EU) to Ireland and Portugal.
Essentially, these new proposals mean that Ireland is to receive better financial terms on the money it is currently receiving under the EU/IMF loan programme.
The decision, adopted by the Commission this morning, covers money from the European Financial Stabilisation Mechanism (EFSM) and is separate from the reductions in Ireland’s interest rates agreed in July by EU leaders.
The proposals, which are expected to be approved by the Council in the coming weeks, will reduce the interest rates paid by Ireland and Portugal to bring them in line with the cost to the EFSM of borrowing the money. This means Ireland will no longer pay an additional 2.9 percentage points. The reduction will apply to money already drawn down by Ireland. The average term of the loans is also being extended from the current 7.5 years to 12.5 years.
In addition to the substantial cash savings for Ireland and Portugal, the new financial terms will bring benefits such as enhanced sustainability and improved liquidity outlooks. Moreover, indirect confidence effects through the enhanced credibility of programme implementation should result in improved borrowing conditions for the sovereign as well as the private sector.
Speaking today, EM Ireland Executive Director Noelle O’Connell welcomed the revised payment deadlines: “The proposed reduced interest rate margin and extended terms will ease the burden of debt on Ireland in the long-term, and will hopefully lead to greater confidence in the Irish market in the short-term.”