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Dublin: 13 °C Wednesday 23 April, 2014

Ireland gets another seven years to repay its European bailout loans

EU finance ministers have officially signed off on a deal which means the average European loan will be repaid in 19.5 years.

Michael Noonan speaks with officials before the beginning of this morning's meeting of EU finance ministers.
Michael Noonan speaks with officials before the beginning of this morning's meeting of EU finance ministers.
Image: Council of the European Union

THE EUROPEAN UNION’S finance ministers have confirmed a deal which will give Ireland several years more to repay the European loans from its EU-IMF bailout.

The finance ministers have signed off on plans which will extend the term of the average European loan from 12.5 years to 19.5 years.

The arrangement also applies to Portugal, which was the third Eurozone country – after Ireland and Greece – to enter an EU-IMF programme.

Today’s decision applies to loans from the EFSM, which is funded by all 27 EU member states, and from which Ireland has borrowed €21.7 billion.

Those loans were due to be repaid on dates between 2015 and 2042 – but the duration of each loan will now be extended by seven years.

The decision – which formally ratifies an agreement earlier this year – will mean Ireland does not have to be ready to repay any EFSM loans until December 2022.

This, in turn, means Ireland will have far more time to build up enough cash to repay those loans – and should ease Ireland’s transition back into the independent money markets and out of the EU-IMF bailout.

The decision will also mean that the overall cost of Ireland’s bailout will increase slightly, as Ireland pays an annual interest rate on the loans drawn down from the EFSM.

Because those interest rates are fixed, however, it is expected that inflation would mean any increase in the total cost of the bailout would be relatively small.

Ministers said a parallel decision would be made by the board of governors of the other bailout vehicle, the EFSF, regarding the extension of its own loans to Ireland.

Ireland has currently drawn down €13.5 billion in loans from the EFSF, with an average maturity of 11.9 years. Another €1.6 billion in loans from the EFSF were approved earlier this week.

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