Dáil debates

Tuesday, 18 January 2011

4:00 am

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)

It is important to recognise the developments that are taking place at a European level in this matter regarding a discussion on the context and content of the current policy. The Minister for Finance met his eurozone counterparts yesterday to discuss the size and scope of the European assistance mechanisms. This matter still is being considered by the euro group, which is at an early stage of its considerations. A number of options have been canvassed and one must ensure the European measures have credibility and stand behind all countries. The euro group is accelerating its work on a comprehensive package and has discussed different elements of this response at its meeting. I emphasise that the euro group is at the beginning of a broad discussion on the size, scope and details of the assistance measures. The interest rate charged to any country seeking assistance is only one element of the discussion. The interest rates charged to Ireland was determined some time ago by a common approach for any borrower. Accordingly, any changes to such rates cannot be negotiated for Ireland in isolation and must be seen in the wider context. Arrangements can only be changed by agreement by all member states.

However, in respect of one aspect of recent media comment, I reject any implication that the rates which were agreed under the European Union-International Monetary Fund programme are not manageable because as was stated when the programme was launched, the indicative rates are manageable. At the same time, I of course would welcome any developments that had the effect of lowering the rates for Ireland. The Minister for Finance yesterday outlined that important legislation is to go before the Dáil that will effect a small reduction in the interest rate charged on the IMF element of the loan. This is a separate matter from the political discussions that took place yesterday.

The Bretton Woods Agreements (Amendment) Bill will enable Ireland to convey to the IMF its acceptance of an amendment to the articles of agreement of the IMF that was approved by the latter's board of governors in April 2008. When Ireland's quota is changed on foot of the IMF agreements of 2008, it will have the impact of reducing the interest rate by approximately 15 basis points, that is, from approximately 5.7% to approximately 5.55%. The amendments in this Bill are known as the proposed voice and participation and proposed investment authority amendments. Once ratified by the required voting thresholds, this will have the effect of marginally reducing the cost of Ireland's assistance from the IMF. The required voting thresholds are 85% of the voting power and three fifths of the members.

Two issues exist, in that specific legislation is being brought forward independent of ongoing discussions in Europe. On the IMF side of the equation, legislation will be introduced to the House this term that will have the effect of reducing by 15 basis points the interest on the loans from the IMF. Second, a broad-ranging discussion is taking place at euro group level under the presidency of Mr. Juncker, who is president of the euro group area's finance council. It now is considering whether to enlarge the scope or increase the size of the mechanism. As Members are aware, Ireland was the first entrant into this mechanism. When Greece came in, the mechanism was not in place and it received bilateral loans from all the countries that participated in helping that country with its problem. This is the context and content of the position as matters stand.

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