Michael Noonan (Limerick City, Fine Gael)

It is very fair to say that when we talk about a bailout for Ireland, or indeed Greece or Portugal, we are not talking about grant-in-aid. We are getting a facility to borrow money and we are paying a very high interest charge on it. We are not in receipt of charity or of grant-in-aid. It is simply a loan facility to keep us going when we could not raise money on the markets, and the interest rate is very high.

I have argued consistently - in Opposition, in Government and at ECOFIN - that one of the flaws in the bailout programmes across the programme countries is that the cost of the programme is excessive, which makes it very difficult for programme countries to come out of programmes because the margin is too big. Clearly, the people who designed the programme in consultation with the last Government had considerations of moral hazard as well as being paid a strong interest rate. They wanted to discourage people from going into programmes and they wanted to ensure that people came off programmes at the earliest possible date. Of course, it is a flawed analysis. As I have told our colleagues in Europe, when a party like Fianna Fáil, which was the party of Government for a generation, is taken from 42% to 15% in a general election, that is moral hazard enough to be going on with when one is Government. One does not need a penal interest rate on top of that to make a Government behave. Despite this, these were the considerations that fed in.

A more realistic consideration is that some of the guarantor countries which are also contributors to the fund, such as Spain and Italy, were last week borrowing money at approximately 5%, and one could not expect guarantor countries which are contributing to borrow at 5% and lend at less than that. There is a real issue in this regard as well because, while the margin over the fund is approximately 2.5%, the margin over the costs of contributors to the fund can be quite slight. This is why it is so difficult to negotiate a very significant interest rate reduction. As a general principle, the architecture defending the euro has flaws in it, one of which is the price of the money.

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