Milan, 12/09/2014 (Agence Europe) - Eurozone finance ministers approve of Ireland's request to be allowed to make an early repayment of its loans to the International Monetary Fund (IMF).
The head of Eurogroup, Jeroen Dijsselbloem said in Milan on Friday 12 September that there was “broad support” in Eurogroup on the question and that all Ireland's lenders had to give their approval before Ireland would be allowed to make any early repayment. On behalf of the European Stability Mechanism (ESM), Klaus Regling welcomed Ireland's request and hoped member states would complete their ratification procedures rapidly in this connection. The head of the European Central Bank, Mario Draghi, simply said that he took note of the agreement in principle. He said the debate was not connected in any way with the debate about the reimbursement of “promissory note” agreements for the bailout of Irish bank AIB.
Under its three-year bailout that ended in December 2013, Ireland received financial aid of €67.5 billion, €22.5 billion of it from the IMF. The IMF disbursed less than €19.5 billion at rates close to 5%. The repayment deadline for Ireland's loans from the IMF is as follows: €171 million as interest payments in 2014; €1.2 billion (€674.2 million of it in interest payments) in 2015; €2.8 billion (€628 million of it as interest payments) in 2016; €3.4 billion (€530 million in interest payments) in 2017; €3.6 billion (€408 million in interest payments) in 2017.
Early repayment of these loans either by borrowing the money at a cheaper rate on the money markets or by selling off nationalised bank assets would save Ireland €375 million. The IMF says that there are no special penalties for early repayment.
Upon his arrival at the Eurogroup meeting, Irish finance minister Michael Noonan said: “We have support of the institutions since my discussions earlier in the week. There is no push back. There are complications with the Swedish elections. They may not be in a position to make a political decision because of the elections even though there is support for what we are doing. There is good indication we will get the support but maybe not formally today and tomorrow.” He is due to discuss the matter with his colleagues from Denmark, Sweden and the United Kingdom, three non-euro countries that have provided Ireland with loans.
The early payment of IMF loans will also be on the agenda of the ECOFIN Council because the EU loaned Ireland money via the European Financial Stabilisation Mechanism (EFSM).
Although backing the idea in principle, some delegations hoped that the IMF would continue to be part of the post-programme surveillance programme under which the troika of lenders (the European Commission, the European Central Bank and the IMF) will continue to monitor developments in Ireland's economy and the country's ability to pay back its international loans.
Portugal is keeping its eyes and ears open. Portugal is following developments in Ireland closely because it is considering doing the same and repaying early the share of its €26 billion loans contracted from the IMF (on which a higher rate of interest is charged). (MB)