18 July 2013

FT: Dublin seeks credit line to help exit bailout programme

Dublin has said it wants to apply for a precautionary credit line to help it become the first eurozone country to exit an international bailout programme successfully later this year.

"What I would like to see is a backstop arrangement which would give additional confidence to the market”, said Michael Noonan, Ireland’s finance minister.

Dublin wants a precautionary programme to help it qualify for the Outright Monetary Transactions programme (OMT), the ECB’s bond buying scheme, and gain access to a funding cushion when it makes a full return to bonds markets in December. The ECB has said to qualify, a eurozone country must first apply to the eurozone’s €500 billion bailout fund for an “enhanced conditions” credit line.

Following a meeting with troika officials in Dublin, Mr Noonan said there was no need to attach additional fiscal conditions in a precautionary programme because of existing fiscal commitments already agreed for all countries in the eurozone. He said Dublin had agreed to one extra measure following its bailout exit, which is to undertake a stress tests of its banks in the first half of 2014.

Just how many conditions would be placed on Ireland if it were to receive a credit line from EU lenders would depend on eurozone finance ministers. The precautionary programme Ireland would most likely be eligible for, called an “enhanced conditions credit line”, includes strict surveillance and quarterly reporting by Brussels and ECB monitors akin to its current bailout programme.

Craig Beaumont, IMF mission chief for Ireland, said it could see Dublin submitting a request for a precautionary credit line in October at the time of the next troika review of Ireland’s programme. But he said a decision on conditionality would have to wait until a request was made by the Irish authorities. It is not yet clear if the IMF will be involved.

Ireland is the eurozone’s best chance of achieving a bailout success, given the difficulties faced by Portugal and Greece in meeting their programme targets.

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