Published September 06, 2013
DUBLIN – Ireland will seek a 10 billion euro precautionary credit line to insulate it against possible market shocks when its bailout expires at the end of this year, Finance Minister Michael Noonan said.
For the first time putting a figure on the post-rescue backstop that Dublin has widely been expected to seek, Noonan told the Irish Independent he was hopeful a deal could be struck with no new conditions attached.
If the rest of its 85 billion euro international bailout program goes according to plan, Ireland will in a few months become the first euro zone country to exit an aid scheme.
That would provide a much-needed success story for the troika of lenders - the European Commission, European Central Bank and International Monetary Fund - which has tied aid to Ireland and four other euro zone states to tough austerity programs.
Dublin's euro zone partners would have to sign off on any precautionary credit, which Noonan told the newspaper would only be drawn on if needed and would act as reassurance for markets that its position was solid.
Ireland's borrowing costs have fallen steadily since peaking in 2011 and it returned to longer-term financial markets by raising 5 billion euros in a ten-year bond sale in March, suggesting it is almost ready to wean itself off emergency aid.
"If we had a credit line equivalent to a full year's deficit, in other words about 10 billion euros, then if something happens ... we have a year's funding of the deficit to allow the thing to work through," Noonan said in comments confirmed on Friday by the finance ministry.
Any precautionary credit line would come from the European Stability Mechanism, the euro zone's permanent bailout fund, and the chair of the bloc's finance ministers, Jeroen Dijsselbloem, said this week that Ireland would get euro zone support in exiting the bailout. He gave no details.
The finance ministry of the region's economic powerhouse Germany said on Friday nothing had been decided yet on Ireland. "So far, there have been no discussions... about Minister Noonan's proposals and there is still some time to go until the end of the program," it said.
European Commission spokesman Olivier Bailly said on Thursday it was very likely finance ministers and the Commission would discuss the best option for Ireland in the autumn.
Reuters reported last month that Ireland was seeking a precautionary credit line, with any conditions focused solely on its still-troubled banks.
The government has said it is also planning to submit proposals to its European partners later this year that would mean additional ESM funds used to help reduce the debt burden from bailing out its banks.
IMF chief Christine Lagarde said in Dublin in March that the fund would look at all options available to help Ireland emerge from the bailout.
An IMF official in Dublin declined to comment on Friday.
(Additional reporting by Annika Breidthardt in Berlin and Jan Strupczewski and Robin Emmott in Brussels; Editing by John Stonestreet)