THE STATE is set to borrow more money from international sources in the coming months in an effort to eventually exit EU-International Monetary Fund financing.
Head of the National Treasury Management Agency John Corrigan said Ireland would take a “very opportunistic approach” in a series of steps to borrowing money from private lenders.
Mr Corrigan was speaking after his agency raised €500 million at an interest rate of 1.8 per cent, a better rate than expected, yesterday.
Investors offered the NTMA almost three times more money than the €500 million it had targeted to raise by issuing treasury bills that are to be repaid in three months.
During a conference call yesterday afternoon, Mr Corrigan said his agency would work to rebuild trust among investors around the world in order to be in a position to borrow even more cash so that the State could wean itself off EU-IMF financing.
Although he declined to say how his “political masters” should formulate Budget 2013, he said that it would be a central factor in influencing market sentiment towards Ireland. That sentiment has improved markedly since the middle of last year. Hard evidence of this was provided by the nationalities of those who lent to the Government yesterday.
Mr Corrigan said that there was “strong evidence” that the “vast bulk” of the bills were bought by foreign institutions.
Ending a seven-day period that has been among the best weeks for the Irish and European economies since the crisis began, the European Central Bank yesterday cut interest rates to a record low, in response to a slowdown in economic growth across the continent. Tens of thousands of homeowners will see their mortgage repayments reduced as a result.
For every quarter of a percentage point the ECB lowers rates, the monthly cost of servicing a €100,000 tracker mortgage declines by about €15. This means that the average tracker mortgage-holder with an outstanding loan of €300,000 will see monthly savings of €45 from the beginning of August.
Ulster Bank was the only one of the State’s main lenders to pass on the ECB rate cut of 0.25 per cent announced yesterday to customers with standard variable rate mortgages.
AIB said its rates would stay the same, while those at EBS – which it owns – were under review. AIB pointed out that despite its failure to pass on the latest cut, it still had the cheapest rates on the Irish market.
Bank of Ireland, KBC and Permanent TSB all said they had their rates under review.
Speaking at his monthly press conference, ECB president Mario Draghi warmly welcomed Ireland’s return to the debt markets, describing it as “very, very important”.
“Actually, it’s so important, that an event like this could be one of the various factors that are making the financial environment now a little less tense than it was a month ago,” Mr Draghi said.
“Ireland is a member country that, through extraordinary efforts, has run a programme which is on track, so much that Ireland returned to the market much earlier than anybody could have expected until two or three months ago.
“I think this must be a success which should be properly celebrated and is testimony to the determination of the Irish Government and the capacity of the Irish people to understand all this programme that needed sacrifices.”
EU economics commissioner Olli Rehn said the transaction was an important step. “It reflects growing international confidence in Ireland’s strong track record of programme implementation,” Mr Rehn said.
The ECB cut its main interest rate by 0.25 percentage points to 0.75 per cent. The bank said, in an implicit reference to Germany, that there was evidence that the economic downturn had spread to countries which had previously avoided the worst of the crisis.
