EU Sets Conditions On Irish Loans

by Ulrika Lomas, Tax-News.com, Brussels

10 December 2010

The Council of the European Union on December 7 recommended preconditions to be placed on Ireland in exchange for financial assistance worth EUR22.5bn from the European Financial Stability Mechanism (EFSM) as part of a larger EUR85bn package of financial assistance requested by the nation.

The Council has recommended the adoption of a programme whereby Ireland will be required to overhaul its banking system, introduce growth-enhancing reforms, and reduce its government deficit to within 3% of gross domestic product by 2015, a one-year extension on the previous deadline.

The package, agreed by ministers at an informal meeting on November 28 in response to a request submitted by the Irish authorities on November 22, includes:

• EUR10bn to be used immediately to recapitalize Irish banks, with a EUR25bn contingency reserve; and
• EUR50bn to cover the financing needs of the Irish government's budget.

Half of the banking support measures (EUR17.5bn) will be financed by an Irish contribution through its treasury cash buffer and investments in Ireland's National Pension Reserve Fund. The remainder of the overall package (EUR 22.5bn each) will be shared equally amongst the EFSM and the European Financial Stability Facility, together with bilateral loans from the United Kingdom, Denmark and Sweden, and the International Monetary Fund.

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