EU sees little risk of Ireland defaulting on euro zone loans

Mon Jun 23, 2014 8:00am EDT

* Dublin to pay back bailout loans until 2042

* European Commission will monitor Ireland's progress

BRUSSELS, June 23 (Reuters) - There is a very low risk that Ireland will not pay back its bailout loans but Dublin must maintain budget discipline to reduce its large public debt, the European Commission said.

Ireland borrowed 67.5 billion euros ($92 billion) from the European Union and the International Monetary Fund to keep itself financed after being cut off from markets in 2010 because of bloated public finances caused by a banking sector crisis.

Dublin is scheduled to pay back the loans gradually until 2042. Until three quarters of the money is paid back, the European Commission will check twice a year how the Irish economy is doing and the country's ability to repay the debt.

"Repayment risks ... are very low at present. This assumes that the authorities continue to implement agreed policy plans and access to credit markets is maintained," the Commission said in a report after the first such check.

It noted that if Ireland implements fiscal plans detailed in its Stability and Convergence Programme (SCP), its public debt will fall to about 90 percent of gross domestic product by 2024 thanks to a primary surplus of close to 3 percent from 2018.

If it does not, public debt will rise to 128 percent of GDP in 2020 from around 124 percent in 2013 and stabilise at that high level.

"The relatively large gap between the no-policy change scenarios and the SCP scenario highlights the importance of maintaining continued fiscal discipline for debt sustainability going forward," the report said.

"Ireland needs to continue with fiscal consolidation, reduce the private sector debt overhang, and further progress financial sector repair to safeguard and strengthen the momentum of the economic recovery," the report said. ($1 = 0.7366 Euros) (Reporting by Jan Strupczewski; editing by Robin Emmott)

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