Leo Varadkar (Dublin West, Fine Gael)
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Question 41: To ask the Minister for Finance if his estimates for interest payments on public debt in 2009 has been revised; and if he will make a statement on the matter. [6260/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The National Treasury Management Agency has advised that Ireland has a net financing need of €24.5 billion in 2009. This is based on the forecast Exchequer borrowing requirement of €18 billion set out in the addendum to the stability programme update, the refinancing of a €5 billion bond that matures in April and a sum of €1.4 billion in respect of the frontloading of the Exchequer contribution for 2010 for the National Pensions Reserve Fund relating to the bank recapitalisation programme. The NTMA estimates that the associated debt servicing cost in 2009 will be €4.5 billion and has advised that it considers the revisions to the debt service estimate included in the addendum are adequate in the context of the current market conditions.

The NTMA has also advised that the main reasons for the increase in the forecast cost of servicing the national debt for 2009 over previous years are the increase in the Exchequer borrowing requirement and the higher interest rates prevailing on government bonds. While the increase in borrowing is the major factor, the current elevated yields on government bonds also contribute to increased debt service costs. Many factors underlie these yields, including global factors, which are affecting all euro sovereign borrowers benchmarked to the German bond, and national specific factors.

The NTMA intends to raise funds on the long-term government bond market through a combination of auctions and syndicated loans. It successfully raised a 5-year €6 billion bond at a coupon of 4% in early January. Ireland is rated as AAA by the credit rating agencies. In addition, we have a relatively low debt level. The general government debt to GDP ratio was 41% at the end of 2008, which is well below the EU average of 60%. At the end of 2008, when account was taken of the cash balances held by the NTMA and the value of the NPRF and other funds managed by the agency, the debt to GDP ratio was reduced to approximately 20% of GDP.

Our favourable debt level will remain below the EU and euro area averages over the coming years. While our debt level will increase in the coming years, our low starting point gives us the leeway to target a restoration of balance to the public finances in the next year. In this way, we can avoid placing too great a shock upon the system as we restore order to the public finances and reposition our economy.

Richard Bruton (Dublin North Central, Fine Gael)
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I thank the Minister for his reply. It is alarming that the new debt servicing cost of €4.5 billion is almost three times the amount in 2008 and it is 33% higher than the Minister's forecast last October for 2009. This reflects the rapid deterioration both in the public finances and in the funding markets. What premium over long-term German bonds was estimated by the NTMA when it reached this figure? Ireland currently pays 2.8% more for ten-year German bonds. Is the agency basing its figure on that or is it more optimistic?

When will the agency have to go to the markets again with a funding offer? It raised funds in January but I understand Irish institutions were very much at the core of subscribing to the offer and they may not be available again. What is the next test of our ability to raise funds?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There was no preponderance of Irish institutions in the bond issue in January. There was considerable international interest in it. One of the unfortunate features of the bond issue while it was being completed was the appearance of an entirely inaccurate story by the national broadcaster about the IMF. Happily, the story did not affect its completion.

The yield on Ireland's ten-year government bonds is approximately 275 basis points over the German equivalent. This spread over Germany is due to a number of factors and it is impossible to quantify the impact of each. These include global factors, which are affecting all euro sovereign borrowers benchmarked to the German bond, and national specific factors. Earlier this year, Germany had considerable difficulty issuing bonds at the stated levels. The NTMA offered 4% on its bond issue on the basis it was confident market expectations would be met, which was the case.

I agree with the Deputy regarding the worrying trend that our gross borrowing requirements this year are far in excess of last year and that is why the Government has brought forward measures to stabilise the public finances. It is essential we do so.

Joan Burton (Dublin West, Labour)
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The Minister said the cost of servicing the national debt is estimated at €4.5 billion, which is almost 100% more than in 2008, when it cost €2.4 billion. In reply to an earlier question, the Minister suggested the taxpayer had not to pay anything to bail out the banks. However, he also said one of the reasons for the significant increase in the cost of servicing the national debt was the higher interest rates being charged on government bonds, which has almost entirely been caused by our banking crisis and the fact that our reputation has been shredded internationally. Is it true that the additional financing cost attributable so far to bailing out the banks is approximately €544 million and, by the end of the year, it will be a considerable part of the additional €2.5 billion needed to service our national debt?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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First, substantial sums have been already received by the State on foot of the guarantee. Second, the best market advice I can obtain is that the major difficulty with increasing the spreads lies with apprehensions about Ireland's economic position and our anticipated economic performance given the substantial declines in growth rates that are anticipated and the fear in markets that the Government will not control the public finances. Happily, the Government is determined to control the finances as the Government is determined to secure the stability of the banking system. The steps we have taken in recent weeks regarding the public service pensions levy will assure markets that the Government is determined to address the imbalances in the public finances.

Arthur Morgan (Louth, Sinn Fein)
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Where will the Minister find this €4.5 billion accruing from the additional costs of his debt? Can he give us an absolute assurance that he will not return to mug people in the public sector again?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Government is attempting to manage the economy in a way that ensures any burdens that need to be borne are done so equally, fairly and equitably throughout the community.