Ireland's PM-elect sees compromise on bailout rate

DUBLIN Sat Feb 26, 2011 6:09pm EST

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DUBLIN (Reuters) - Ireland's prime minister in waiting Enda Kenny on Saturday said he believed the European Union and International Monetary Fund might compromise on the interest rate charged on an 85 billion euro bailout.

Kenny, whose Fine Gael party is set to become the largest in parliament after elections on Friday, said he expected to lead the next government but that it was too early to say whether that would be in coalition with the Labor party.

But he said he had already begun to speak to European officials on the new government's top priority: re-negotiating the terms of the bail-out package, agreed by the outgoing government last year, which are seen as punitive in Ireland.

Speaking to national broadcaster RTE, Kenny said that he would begin provisional talks with European officials next week on a possible adjustment to the terms.

"I see room for maneuver here on the interest rate and in terms of the cost of the bailout deal, with particular reference to the banking structures in there," Kenny said.

The 85 billion-euro ($116.3 billion) bailout, which includes 45 billion euros in loans from Europe, covers Ireland's borrowing costs for the next three years.

The interest rate is estimated at around 5.7 percent, but Kenny has not said how much of a reduction he is targeting.

"We are going to move on this next week" in talks with European leaders at a meeting of the European People's Party in Helsinki on Friday.

Kenny said he spoke to European officials after early election results were released on Saturday, but did not give details.

Other European countries may be more amenable to compromise when an upcoming round of stress tests expose weaknesses in their own banks, Kenny said.

"Other European countries, when the stress tests are completed, may have serious difficulties as well."

Asked if he would bring up the possibility of Ireland defaulting on some debt, Kenny said he would prefer to discuss "cooperation and consent."

(Reporting by Conor Humphries; Editing by Jon Boyle)

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