DUBLIN (AP) — Ireland’s government wants the European Union to provide a new precautionary credit line worth some 10 billion euros ($13 billion) to ease the country’s planned exit this year from its international bailout.
Finance Minister Michael Noonan said Ireland needs the credit line only as last-ditch insurance as the country prepares to re-enter the bond markets fully by the end of this year.
In an interview with the Irish Independent newspaper, Noonan said an EU-backed credit line of 10 billion euros would equate roughly to Ireland’s forecast 2014 budget deficit. He said such a guarantee should reassure bond buyers to snap up new Irish securities at affordable rates.
“But my hope would be that it (an EU credit line) would just be there as a backstop to give confidence to our lenders, that we’d actually never have to use the precautionary credit line,” Noonan was quoted as saying in the interview published Friday.
The EU’s bailout fund, the European Stability Mechanism, contains two options for member states to negotiate advance credit agreements in the event that a surprise market shock undermines a euro member’s ability to sell its bonds at reasonable rates.
While the ESM already has provided loan aid to Spain and Cyprus, it has yet to provide any precautionary credit lines. If Ireland were to receive such a credit line, it would likely have to accept even more EU-IMF oversight of its austerity program.
In Brussels, the chairman of the 17-member group of euro zone finance ministers, Dutch Finance Minister Jeroen Dijsselbloem, said the EU would provide Ireland unspecified support to ensure that its end to reliance on EU-IMF loans “is a good exit and not a temporary exit.”
And in Frankfurt, European Central Bank President Mario Draghi said the so-called troika of the EU, ECB and IMF was open to discussions on “a possible successor program” of support for Ireland after its bailout expires.
The Irish Department of Finance said the government intended to secure the credit “backstop” after Ireland publishes its 2014 budget Oct. 15. It will be the sixth straight austerity budget for Ireland dating to 2009 following the collapse of the country’s construction-fueled Celtic Tiger boom.
Ireland in November 2010 was forced to negotiate a 67.5 billion euro ($88.5 billion) loan package from EU partners and the International Monetary Fund after the surging cost of its emergency bank-rescue program drove it itself to the brink of bankruptcy.
That three-year source of funding is due to run dry by the end of 2013, when Ireland expects to resume normal borrowing by selling bonds.
Irish bond yields have steadily dropped below 5 percent over the past year as EU-IMF overseers lauded Ireland’s pursuit of austerity and the country’s treasury resumed limited auctions of government bonds. Irish yields have remained lower this year than those on the bonds of Spain and Italy.