European monetary affairs commissioner Olli Rehn has made the case for reducing the interest rates paid by Ireland and Greece on their EU-IMF bailout packages.
Ahead of a euro zone summit in Brussels on Friday, Mr Rehn said consideration should also be given to extending the term on the loans to enable the countries to achieve debt sustainability.
"The issue now and tomorrow is debt sustainability, and therefore I can see that there is a case to reduce the interest rates paid by Greece and Ireland," he said.
"In that context, it is important that we also look at loan maturities so that we can go beyond the hump of 2014 and 2015 and that also contributes to debt sustainability."
Fine Gael TD Alan Shatter described Mr Rehn's comments as "helpful".
He said a 1 per cent reduction in the interest rate on Ireland's bailout from the EU could save the State €1 billion over four years. These savings would be invested so as to create jobs rather than reduce the deficit to 3 per cent by 2015, he said.
Taoiseach-elect Enda Kenny travels to Brussels on Friday for the summit of euro zone leaders.
The meeting is expected to hear discussion of lowering the interest rate on Irish loans in the context of reforms to the euro zone bailout fund but there is concern in political and diplomatic circles that the effort may fall short of market expectations.
The summit may also address the creation of a harmonised corporate tax base in the EU, something which Fine Gael vowed to resist during the election campaign.
Regarding the bailout terms, Mr Rehn said there was a “moral hazard” that needed to be avoided “at any cost”.
“That is done through the rigorous conditionality of the EU-IMF programs, rather than high level of interest rates,” he said.
His comments came in Luxembourg today after Moody's slashed Greece's credit rating on fears the country's efforts to cut its debts will fall short. The ratings agency cited risks to Greece's fiscal consolidation programme from a revenue shortfall and difficulties in reforming healthcare and state-owned companies.
Moody's also said it was actively monitoring the efforts of the incoming Fine Gael-Labour government to win easier terms for Ireland’s loans under the EU-IMF rescue deal. It signalled that another Irish rating cut was not imminent.
Mr Shatter told RTÉ it was "no secret" that Fine Gael and Labour had reservations about the EU-IMF deal. He said the programme for government made it absolutely clear Fine Gael and Labour wanted to sit down and talk to the EU and IMF about the agreement.
Mr Shatter said measures included in the deal to bring stability and confidence into the banking sector had not yet worked.
“We’re still in a very bad place,” he said. “We still have huge difficulties and I think at this stage, even though this agreement was concluded recently, there is an absolute necessity to review its impact and the measures that have been put in place with regard to banking so far."
Additional reporting- Reuters
