Belfast Telegraph

No change to bailout deal, EU tells Republic of Ireland

Enda Kenny is beginning behind-the-scenes negotiations to form the next government
Enda Kenny is beginning behind-the-scenes negotiations to form the next government

The European Commission has vowed to carry on supporting Ireland's economic recovery - insisting that an EU bailout package is already giving the country a "fresh start".

The new Taoiseach Enda Kenny wants a reduction in the interest rate agreed by his predecessor for loans to Dublin totalling €85bn (£72b).

When he embarks on talks in Helsinki and Brussels in the next few days he will argue that the repayment terms of the bailout deal he inherited are too expensive and risk undermining the recovery the loan is supposed to support.

Yesterday, with Mr Kenny beginning to assemble a coalition government, the Commission insisted the deal already agreed, involving EU and International Monetary Fund loans, was the right one.

"We look forward to continue supporting the Irish people and the next Irish government in the implementation of the EU-IMF programme, which is key for Ireland's economy and its revival," said Economic and Monetary Affairs Commissioner Olli Rehn.

He added: "We have the common goal for Ireland to revive its growth dynamics and succeed in ensuring its debt-sustainability."

Later his spokesman insisted: "This programme is the best guarantee for the Irish economy to recover, to have a new fresh start for the benefit of its citizens in the medium and long term, with a more solid basis, whether it comes from the restructuring of the banking sector or the fiscal consolidation of Irish state."

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But Mr Kenny will insist his election gives him a mandate to change the bailout terms, and he will begin the debate at talks in Helsinki on Friday with fellow centre-right political leaders across Europe.

A summit of all EU leaders in Brussels on March 11 will be crucial, when plans will be discussed for a new, permanent, EU system for future bailouts in Europe after the current temporary system - used to finance Greece and Ireland - expires in 2013.

The permanent system will include the scale of interest rate for bailouts, and Mr Kenny wants any lower interest rate for the future to apply retroactively to the existing Irish deal.

Mr Rehn said the summit would look at pricing policy for rescue loans, including interest rates, "from the overall European perspective to safeguard financial stability in the euro area and ensure debt-sustainability of all its members".

But applying any lower rates to a deal already done with Ireland may require concessions from Mr Kenny - with Ireland's low 12.5% corporation tax rate in the firing line.