Irish Prime Minister Brian Cowen insisted yesterday that a massive international bailout agreed after weeks of negotiations was “the best deal available” for Ireland and its people.
Speaking to reporters in Dublin after the details of the European Union and International Monetary Fund loans were unveiled in Brussels, Mr Cowen said the deal was vital to allowing debt-laden Ireland to move forward.
“The final agreed programme represents the best available deal for Ireland,” he said, as the EU confirmed the deal worth €85 billion, including €35 billion for the nation’s struggling banks.
“It allows us to move forward with secure funding for our essential public services, for our welfare state, for the most vulnerable members of society that depend on them.
“And it provides Ireland with vital time and space to successfully and conclusively address the unprecedented problems we have been dealing with since this global economic crisis began.”
Tens of thousands of Irish people took to the streets of Dublin on Saturday to denounce the bailout and a four-year austerity plan unveiled last week, which signalled €15 billion of savings as Dublin seeks to reduce a huge deficit.
Many also called for Mr Cowen to quit, echoing calls by opposition parties, but he has said he will not call elections until the austerity plan and a budget due to be published next month are passed. This is not likely until January.
Addressing the Irish people directly yesterday, Mr Cowen said that “without these loans, the necessary tax increases and spending cuts would be far more severe”.
He also said that Ireland had a little more time to reduce its budget deficit from the current rate of 32 per cent down to a target of three percent. The original goal was 2014, but Mr Cowen said the plan “can be extended to 2015”.
The interest rate is also less than the 6.7 per cent reported in the press this weekend – Mr Cowen said Ireland expects to pay an average 5.8 per cent a year on the loans, although this would be subject to market conditions.
He said this was a better rate than Dublin could expect on the financial markets, where the cost of Irish borrowing has soared in recent weeks as investors lost confidence in the country’s ability to cope with its debts.
These were incurred in large part by the bailout of banks left exposed in the global financial crisis, and much of yesterday’s bailout is targeted at them.
Out of the €85 billion in loans, €10 billion will be immediately made available to the banks and a further €25 billion will be provided as a contingency fund. Half of this money – €17.5 billion – will be raised by the Irish government by using pension and other cash reserves.
A poll this weekend found that 57 per cent of Irish voters thought the country should default on its debts, but Mr Cowen said this was not an option.
“We are not an irresponsible country. We are a country that recognises its international obligations as a member of the euro area, which wants to contribute to euro-currency stability,” he told reporters.
He added: “In relation to the question of leaving the euro, that is not an option for this country.
“This country’s economy is inextricably integrated and linked with the European economy and needs to continue to see integration of that economy for our prospects of increasing GNP (gross national product) and growth and jobs and investment in the future.”