While Malta will not incur expenditure to help in the Irish bailout, its guarantee share in the bailout of the Irish economy by the eurozone and IMF will probably be in the region of €50 to €60 million, Finance Minister Tonio Fenech told The Times Business.
“If the final bailout figure for Ireland is about €80 to €90 billion Malta’s guarantee share will be in the region of €50 to €60 million. Unlike the Greek bailout, however, where we gave a loan, Malta will be providing a guarantee,” Mr Fenech said in an interview.
“After the Greek crisis every country in the eurozone pledged a level of guarantees amounting to a total €440 billion and Malta’s guarantee share is approximately €400 million. Once a country requests a bailout, for every €2 pledged by the eurozone the IMF will supplement this with €1, which is why the package amounts to €750 billion, and there is also another €60 billion coming from the EU’s balance of payments fund,” he said.
Mr Fenech said that the European Financial Stability Facility mechanism, established after the Greek crisis, will be used to support the Irish government.
“A large proportion of the bailout will go to sustain Ireland’s sovereign situation, i.e. the needs of the Irish government, not the banks. There’s a misconception that this package is just targeted at the banks which is not the case. Three quarters of the package will go to the Irish state so that it will be able to finance its needs over the next two years, at reasonable rates. There is a portion, a contingency, in case the banks need to be supported by the Irish government.”
Asked if he thought the EUIMF bailout for Ireland will stop the financial crisis spreading to other parts of the eurozone, Mr Fenech replied: “That’s a very difficult question to answer. The international markets are already looking at Portugal and Spain because they perceive they might be encountering similar problems.
“We have set up this mechanism to give certainly to the markets which will be used in Ireland’s case and we hope the markets will be re-stabilised as a result.
“If not, the mechanism is open to any member state which might need support when the market becomes too agitated.”
Mr Fenech said that any financial instability is always a threat to the eurozone, in whatever member state it originates in, but he disagreed with those who say the solution is the dismantling of the euro.