Malta was expected to guarantee between €23 and €27 million of the EU-IMF bailout of Ireland, Finance Minister Tonio Fenech told Parliament yesterday.

Answering questions by opposition finance spokesman Charles Mangion, following a ministerial statement on the €85-billion financial package agreed to by eurozone finance ministers, Mr Fenech said Malta would receive a fee for its guarantee.

He said that €50 billion were going directly to the Irish government to sustain its needs, including its social programmes. Otherwise the austerity measures would have been much more devastating on the Irish people. The other €35 billion were reserved as contingency funds to sustain the Irish banks when and if needed.

Minister Fenech said that this guarantee was far lower and very different from the €80-million guarantee to Greece as part of the EU-IMF loan to that country. Malta was guaranteeing a total of €392 million in the Euro Financial Stability Mechanism (EFSM) which had a total facility of €750 billion.

Saying that the mechanism established solidarity among member states, Mr Fenech thanked Parliament for its unanimous approval of these guarantees providing for financial and economic stability in other countries.

Malta together with the other eurozone members had agreed on the levels in deficit and public debt reduction but had not imposed any austerity measures the Irish government had decided to take.

The Irish government had decided to decrease the minimum wage because this had increased so much as to make the country uncompetitive. The decision was motivated by economic reasons to decrease the cost base for the recovery plan to succeed through new investment. He said this was a lesson for Malta, adding that this was the reason for the government proposing a cautious budget which aimed at protecting jobs and retaining the country’s competitiveness.

Answering questions by Alfred Sant (PL) on moral hazards that had to be shouldered by the Irish banks’ shareholders, Mr Fenech said that in principle one had to agree. But one also had to consider the consequences caused by financial institutions going bankrupt.

The Lehman Brothers bankruptcy had caused all the economic international turmoil the world was still going through. This was the reason why the EU was embarking on better financial regulations which also imposed more discipline.

The EFSM which would start operating from 2014 included collective action clauses which ensured that where the country was not bankrupt but had financial institutions which were in difficulty, private creditors would be requested to accept debt restructuring if necessary.

Mr Fenech said that the EU finance ministers would only discuss issues if a member country requested their assistance.

Spain, whose deficit was much lower when compared to the Greek and Irish deficits, had published an agreement with its regional authorities so that they would publicly report their deficits within a fixed period of time.

Portugal was also addressing its deficit and public debt through austerity measures. Although the markets were still agitated, the mechanism established by the EU had worked and there was no need for panic.

The minister also referred to comments made by the Hungarian Prime Minister during his recent visit to Malta, and said it was a mistake to attribute difficulties in certain countries to the euro. Argentina and Latvia, which were not eurozone members, had been bailed out. A country qualified for eurozone membership if its economy was in line with that of the eurozone and certain objectives had been reached.

In his questions, Dr Sant said that it was a political shame to participate in such agreement where the Irish were facing enormous burdens through reductions in the minimum wage and cuts in social programmes in defence of banks which had lent money to Irish banks for speculative purposes. These banks which had gone bankrupt were backed by French and German interests, but the Irish people had to face the consequences. He called the 5.8 per cent interest rate “obscene”, adding that the country’s economic growth could not support such interest rates.

Other questions were put by Labour MPs Carmelo Abela and Owen Bonnici.