Ireland opposition says high-cost rescue unacceptable
Ireland entered the final hours of negotiations for an EU/IMF bailout on Saturday, but the parties expected to form the next government said the deal would be unacceptable if the interest rate was too high.
Labour Party leader Eamon Gilmore described as “deeply disturbing” Irish media reports that the rate Irish taxpayers would have to pay for an estimated 85 billion euro ($113 billion) rescue might be as high as 6.7 percent.
“If true, it would be an appalling capitulation by the Irish government. And it would be a betrayal of the founding principles of the European Union,” he told a party conference.
The main opposition Fine Gael party said on Friday that any rate over 6 percent would be unacceptable.
Ireland has been forced to turn to the European Union and International Monetary Fund to save it from a financial crisis rooted in years of reckless bank lending that turned bad after the collapse of a property boom.
European officials hope the rescue will help draw a line under the debt crisis. Having started in Greece, it now threatens to engulf countries like Portugal and Spain, the fourth-largest economy in the euro zone, and could jeopardize the future of the euro itself.
Negotiators were holed up in a 250-year-old Dublin luxury hotel to finalize the Irish agreement, expected to be announced on Sunday.
Prime Minister Brian Cowen has vowed to get the best deal possible, but local media said Ireland would have to pay a higher rate of interest than Greece paid for its EU/IMF bailout earlier this year.
A deal at an interest rate seen as punitively high would deal a new political blow to Cowen, already the most unpopular Irish leader in modern times.
The opposition Labour and Fine Gael parties, expected to rout Cowen’s Fianna Fail and take power in an election within months, could balk at implementing a deal they see as unfair.
Market pressures have shown no signs of easing. The euro stumbled to a two-month low against the dollar on Friday and the risk premiums investors demand to buy Irish, Portuguese and Spanish debt instead of German Bunds hovered near record highs.
UNION MARCH
Unions are holding a march through Dublin later on Saturday to protest against the bailout and a government austerity drive underpinning it, but overnight snowfall could hurt turnout.
Labour and Fine Gael want bond investors who lent money to Irish banks to take on a bigger share of the bailout burden, rather than foisting it all on Irish taxpayers. But the downside of forcing bondholders to take losses is the risk that it would damage confidence in other European banks and spread the crisis.
State broadcaster RTE reported late on Friday that the interest rate would be around 6.7 percent, at the high end of expectations, and above the rate of 5.2 percent secured by Greece for its 110 billion euro package.
Source: Reuters