MINISTER FOR Finance Michael Noonan has said that guarantees from the EU bailout fund on Irish sovereign bonds could help Ireland to borrow again in the markets at very low interest rates.
He said he would raise the possibility of the European Financial Stability Facility guaranteeing Irish Government borrowing to a certain level to help Ireland re-enter the bond markets.
“That would get us back into the market at very low cost,” said Mr Noonan. “As time went by, the guarantees could be withdrawn.”
The Minister said that during their discussions earlier this year US treasury secretary Timothy Geithner said that guarantees on state bonds offered a more flexible option and were easier to administer than state bonds being issued centrally by the European Union.
Asked when the Government would borrow again in the markets, chief executive of the National Treasury Management Agency John Corrigan said the agency hoped to “put our toe” in the short-term borrowing market in the second half of 2012.
The pressure was off the Government to return to the markets next year, he said, but he expected to see normality return to the markets as the Greek debt crisis had to be resolved “sooner or later”.
Speaking at the launch of the NTMA’s 2010 report, Mr Corrigan said the agency had refinanced €500 million in short-term borrowings following “reverse inquiries” from lenders.
Mr Noonan said any solution to the Greek crisis would benefit Ireland and expected that any plan to ease Greece’s debt burden would be on a voluntary basis.
“We have to aim at a solution in Europe that is convincing,” he said. “Kicking the can down the road is not a solution.”
Mr Corrigan told Reuters that Ireland didn’t need private-investor involvement in an Irish solution to the debt crisis.
“Any such involvement would be an extremely risky path to go down,” he said.
“Any such suggestion would result in a permanent elevation in our borrowing costs.”
Ireland’s downgrading to junk status last week means the NTMA will have to raise debt from “investors at the margin with a higher risk appetite”, said Mr Corrigan.
Mr Noonan said that the Government was in discussions with the NTMA about how its pay structures, which are higher than Civil Service rates, could be “altered”.
Asked if he believed Ireland would require a second bailout, Mr Noonan said that the debt was sustainable and would become more sustainable if there was a European solution to the debt crisis.
The NTMA borrowed €20 billion last year at an average interest rate of 4.7 per cent before Ireland withdrew from the bond markets.
Some €23 billion has been borrowed under the EU-IMF programme at an average rate of 5.6 per cent for 6.8 years on average.
The general Government debt is projected to increase by €25 billion to €173 billion in 2011 or 111 per cent of GDP, while the debt-to-GDP ratio will peak at 118 per cent or €200 million in 2013.
The NTMA said that there would be €5 billion left in the National Pension Reserve Fund after the latest €19 billion bank recapitalisations.
