The EFSF financial assistance programme officially expires today with a successful Irish programme exit. Since the programme started in February 2011, the EFSF has disbursed a total of €17.7 billion to support the macro-economic adjustment in Ireland. The loans were granted at a very low interest rate with a weighted average maturity of up to 22 years.
Klaus Regling, the CEO of the EFSF, said: “Ireland’s programme exit is a huge success for Ireland and the euro area as a whole. It shows that our crisis resolution strategy of granting temporary loans against strong conditionality is working. It also shows that the resolve of the government to implement the adjustment programme and the population’s support for temporary hardship as a result of necessary adjustment are key elements for the success.”
The EFSF’s share of the overall €67.5 billion amount of external assistance, as agreed by ECOFIN and the Eurogroup in December 2010, was disbursed in 10 tranches in the course of the last three years. The overall amount was co-financed by the EFSM (€22.5 billion), the IMF (€22.5 billion) and by €4.8 billion in bilateral loans from the UK, Sweden and Denmark. Ireland has successfully completed all troika evaluations with no delay. The first disbursement of EFSF was made in February 2011 and the final instalment was transferred on 4 December 2013.
The end of this disbursement plan does not finish the EFSF’s task, as it is responsible for ensuring that beneficiary countries will be able to honour their debts. The EFSF will therefore continue to work closely with Ireland and peer institutions.
“The results of the Irish determination are an inspiration for the rest of the euro area”, Klaus Regling added. “The impact of combining fiscal consolidation, structural reforms and financial sector repair has brought Ireland back to a path of sustainable growth, declining unemployment and improved business confidence.”
EFSF-makes final disbursement to Ireland, 4.12.13
EFSF CEO Klaus Regling in interview with The Irish Examiner
Looking forward, what comes next for Ireland - you have a responsibility to the creditors to ensure they recover their loans - what are the most vital things for Ireland to do to ensure the country can repay in your view?
That is a by-product. If Ireland conducts the right policies, continues with its adjustment, respecting the recommendations of the Commission given in the context of the European semester the country specific recommendations, removing obstacles to growth then I am sure the economy will continue to recover. But for me that is not the main purpose of good economic policies. The main purpose of good economic policies is to have positive developments in Ireland, and then repaying the existing debt will be no problem, particularly because our maturities are long, on average 22 years.
Will you keep a very close eye on the Irish budget?
Yes. This should not be confused with any additional conditionality or anything of that sort required during the period when there were disbursements. But we want to be informed about the budget. Our interest is to make sure that money that has to be repaid to us is actually available.
Will you have an influence on whether there should be spending cuts or tax increases in the budget for instance?
We will not impose any policy measures like that but in our regular monitoring about the ability to pay we have to make sure the money is foreseen in the budget. As long as that is case - and that will be the normal situation because the payments are no surprise, they are known in advance -, there will be no demands of any sort made on the Irish government. Only if we come to the conclusions that payments that are due are not foreseen in the budget, then we would have a serious talk with the government but I would not expect that to happen.
The Irish government believes that the best solution would be for the banks to guarantee 10 per cent of the tracker mortgage book and the government guarantee the remaining 90 per cent with the ESM overlaying this with a guarantee to ensure a double A credit rating so they could use them with the ECB LTRO to access a funding line. How do you view this?
We do not have an instrument that would make that possible. There is no attempt in our governing bodies to create new instruments like that.
If it made a difference to a country’s ability to grow and repay its debts, should this be reconsidered are there any circumstances under which you would reconsider?
This is a specific problem to Ireland and not in other countries and I do not so far see an appetite to create such an instrument for that. One should remember that such a decision would have to be taken unanimously among all the euro area Member States.
In previous interviews you have not ruled out retrospective recapitalisation in the future once the elements of Banking Union are in place - is this correct?
I quoted the statement from the Eurogroup that said that on a case by case basis and based on a unanimous decision, it might be available. My personal impression is that the appetite is not very high to do it. But that sentence is there in the communiqué and that is what the ministers have said.
Do you think the Irish government is likely to require a recapitalisation of the money they put into the banks in the future?
It would always be attractive for those affected, but the question is whether there is a unanimous view to do it, and there I am sceptical. But ministers have said it is a possibility. Because nobody knows what the future will look like, so not to close a door is probably wise. But given the circumstances as they are at the moment, it does not look like there would be a consensus in the Eurogroup to go in this direction.
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