Malta will not have to fork out any money or loans towards the Irish bailout agreed by eurozone finance ministers last Sunday.
The funds, expected to amount to between €80 to €90 billion in loans to the Irish government, will come out of a new EU financial mechanism designed earlier this year following the bailout of the Greek economy last May.
“The Irish bailout is different from the Greek one and Malta will not have to fork out a cent,” EU sources told The Times yesterday.
“The money will all be raised on the international markets through the mechanism created by the EU following the fall of Athens. This means individual member states will not be asked for more handouts.”
Last May, following the near collapse of the Greek economy, Malta lent Greece €27 million as part of a €110 billion rescue package agreed by the EU, the International Monetary Fund and the Greek authorities.
Malta had to borrow this money to make its contribution, although at the end of the three-year deal, the transaction should leave a positive balance on its public coffers as the island borrowed at a favourable rate.
Following Greece’s bailout, the EU, together with the IMF, agreed on a more permanent €750 billion rescue facility to be used if other member states find themselves in difficulty.
This facility, consisting of guarantees by the 27 member states and the European Commission, acts as collateral to raise credit on the international markets once activated.
The Maltese Parliament last June passed legislation to make €398 million available in guarantees as part of its commitment to this fund.
EU sources said that following Ireland’s call for assistance, the fund would be activated for the first time to generate the necessary financial backing for the Irish economy. Following rife speculation last week, the Irish government last Sunday requested financial assistance from the EU to avert a growing crisis brought about mainly by the failure of Irish banks.
EU Finance Ministers, including Malta’s Tonio Fenech, discussed the Irish request in an urgent teleconference.
The EU Council said the financial assistance package to the Irish state should be financed from the European financial stabilisation mechanism and the European Financial Stability Facility (EFSF) – the two main components of the EU’s rescue mechanism.
The UK and Sweden, which do not form part of the eurozone, said they want to take part in Ireland’s funding through bilateral loans.
The financial injection to the Irish economy will come with quite a few strings attached and will require the Irish government to introduce unprecedented austerity measures.