CORK, Ireland (Reuters) - Euro zone finance ministers will probably agree on Friday to give Ireland and Portugal seven more years to repay loans from the European Union, a senior official said on Thursday, to help both countries return to financial markets.
Dublin and Lisbon lost access to affordable financing in 2010 and 2011 respectively and took emergency loans from Europe, and extensions to these should make them less of a burden as the countries seek to put their bailouts behind them.
“The intention is very positive to look at the extension of the maturities both for Ireland and for Portugal,” Jeroen Dijsselbloem, chairman of the euro zone finance ministers, told a news conference.
Lisbon called the current repayment schedule “impossible” and said it deserved an extension amid a tough austerity drive.
Confirming what Reuters reported on Tuesday, Dijsselbloem said the European Central Bank, the European Commission and the International Monetary Fund made a proposal for a seven-year extension, which is now under discussion.
“I hope that we will be able to finalize that tomorrow,” he said, referring to the meeting of euro zone finance ministers on Friday in Dublin.
Portuguese Foreign Minister Paulo Portas said securing the deal was vital as the repayment conditions were now too harsh.
“It’s important because after two years of very tough efforts and sacrifices shared by all Portuguese, if we now achieve, as we deserve, the ability to pay back our loans under reasonable rather than impossible conditions ... it’s good for the country,” he told reporters.
Finland’s Prime Minister Jyrki Katainen also said in Lisbon that Portugal had done an impressive job reforming its economy and finances and deserves to be helped by its European partners.
“What Portugal is doing will work,” he said.
The average maturity of the overall loans to Ireland is 12.5 years and to Portugal between 12.5 and 14.7 years depending on which EU fund provided the money. Ireland is to return to full market financing late this year and Portugal in 2014.
Dijsselbloem, who was speaking at University College Cork, where he spent time as a student, said he also saw the euro zone’s economy showing signs of growth towards the end of this year and pulling out of recession, while he singled out Spain as a country that could show a strong rebound.
“A meaningful recovery is not yet to be expected across the euro zone until the end of this year and there will remain significant differences between different member states,” he said.
“Spain has the potential to become one of the economic engines of the euro zone... I would not be surprised if Spain is going to surprise us all by showing a very strong economic recovery.”
Writing by Robin Emmott, additional reporting by Andrei Khalip in Lisbon,; editing by Stephen Nisbet