Ireland economy: EU agrees to loan maturity extension
On April 12th, the EU’s Council of economy and finance ministers (Ecofin) agreed in principle to extend by seven years the maximum average maturity of the EU bail-out loans to Ireland and Portugal.
An agreement to extend the maturity of the EU’s bail-out loans to Ireland and Portugal was widely anticipated following Ecofin’s decision in March to ask the troika – the European Commission, IMF and the European Central Bank (ECB) – and the European Financial Stability Facility (EFSF), a euro area rescue fund, to explore viable options to help the two countries reduce their annual refinancing needs in the next 10-15 years. The debt reprofiling options explored ranged from an extension of two and a half years to one of ten years. According to the troika and the EFSF, a seven-year extension was the preferred option, as it best accommodates the “constraints and preferences of debtors and creditors”.
The loan maturity extension, according to Ecofin, is dependent on both Ireland and Portugal continuing to implement their respective bail-out programmes. Although Ireland still faces considerable challenges, especially uncertainty about its economic growth prospects and the risk to the banking system of high residential property mortgage arrears, its preparations to exit its programme when it runs out in November 2013 are well advanced. Portugal’s programme, which expires in July 2014, ran into difficulties in April when the country’s constitutional court ruled that some measures in the 2013 budget were unconstitutional.
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