EU forced to cut Irish interest rate

A lowering of the interest rate being charged by the European Union for its share of the current 85 billion euro bailout loan will not deflect the Dublin government from implementing further cuts to services as well as new stealth taxes, the government has said.

Taoiseach Enda Kenny and Minister for Finance Michael Noonan trumpeted the changes, which they said was a very significant step and would remove up to a billion euro annually from the cost of servicing the debt.

Minister Noonan indicated there is no prospect of significant deviation from the planned ‘adjustment’ of 3.6 billion euro for next year.

“I’m afraid we still have to face the music in December,” declared Mr Noonan, who added that the budget for 2012 would have to contain cuts and taxes similar to those imposed this year.

The European Council agreed to the changes to the bailout loan on Thursday in order to protect the euro currency and Europe’s troubled banking system from a spiralling sovereign debt crisis.

Faced with the likelihood of a sudden, uncontrolled sovereign default (bankruptcy) by the 26-County state and others -- mainly Greece -- EU leaders on Thursday agreed to lower the usurious interest rates imposed for their loan facilities by 2%, as well as extending the terms of the loan from 7 to 15 years.

It was also announced that the process of European economic centralisation would be accelerated, with moves advanced towards a common tax policy.

Sinn Féin Finance spokesperson Pearse Doherty described the agreement at the European Council as “a missed opportunity” and that it “fails to deal with the real problems underlying the Euro debt crisis”.

He said that any reduction in the interest rate was welcome, but this did not represent a significant gain for Ireland.

“With our national debt set to exceed 200 billion euro by 2014 this interest rate reduction will do nothing to address our national debt.

“The only way to reduce this debt is by burden sharing with senior bondholders and loss sharing with the ECB.

“Unfortunately these issues are explicitly ruled out for Ireland in this evening’s agreement and it seems that Enda Kenny, by signing up to this agreement which rules our any type of private sector involvement in Ireland’s debt crisis, has ditched any attempts to impose losses on senior bondholders in Anglo Irish Bank as announced by the Finance Minister on his recent trip to Washington.”

Sinn Fein has repeatedly pointed out that a single 703 million euro payment is due to be paid in November to international capitalists who invested in bonds issued by Irish banks. The value of the unguaranteed bonds -- which the state is under no obligation to honour -- mirrors almost exactly the amount of money taken out of the health budget this year.

This sum is but a fraction of the government’s unnecessary compensation to foreign institutions, mostly European banks, who unwisely bought bonds offered by Irish banks before the scale of the financial crisis emerged.

“The government is set to inject 19 billion euro into the four covered banks in the coming days that will be spent paying off senior bondholders. In the coming two months more than 4 billion euro will be spent on bondholders in the banks,” Mr Doherty said.

“The government and our European partners need to stop burying their heads in the sand. Continued austerity coupled with unsustainable debt will lead to default.

“The European Council acknowledges as much today in their second bailout for Greece.

“While the government will attempt to present as positive a spin on tonight’s deal as possible unfortunately it changes very little and does not address the core problems underlying the Eurozone debt crisis.”

Urgent Appeal