DUBLIN (Reuters) - Ireland wants to reschedule debt issued under its EU/IMF rescue package and will not accept less favorable treatment than other bailed out countries in changing the deal, its public expenditure minister said on Thursday.
Ireland, which between 2011 and 2013 will borrow 67.5 billion euros ($96 billion) from its creditors at a maturity averaging 7.5 years, is seeking improvements in the terms to ease a debt pile inflated by bank bailouts and a yawning budget deficit.
Brendan Howlin told Reuters that the government intended to seek to reschedule the International Monetary Fund/European Union portion of its debt in due course. “Obviously long-term rescheduling of debt is something that would be desirable and we will deal with it,” Howlin, appointed in March to the newly created expenditure department, said.
Ireland is hoping to get a cut in the cost of its loans from the EU but Howlin said Dublin would also like a longer-term commitment from the European Central Bank (ECB) on the provision of emergency liquidity to Irish banks.
“We want a better interest rate and we want affordable long-term liquidity for the banks. We had some comfort from the statement from the ECB after the recapitalization announcement but it is difficult when it is on a medium term basis and that is something we are working on still.”
ECB policymaker Luc Coene told Reuters in Brussels on Thursday that the central bank was still working on a special facility for banks frozen out of the interbank market and reliant on the ECB for funds.
Ireland is under pressure from some euro zone members, chiefly France and Germany, to raise its iconic 12.5 percent corporate tax rate in return for a one percentage point cut off the average 5.8 percent rate of its loans.
Greece got a similar reduction in March after it pledged to raise 50 billion euros by selling state assets by 2015.
However, with Greece currently in talks with the EU and IMF over improving its loan terms, Howlin said it would be unreasonable for one country to get better terms than another or to force Ireland to surrender something to do so.
“It is unreasonable to piggyback domestic issues (on the interest rate cut),” Howlin, a member of the junior coalition Labour party, said.
Some euro zone officials have said Dublin could help its case for an interest rate cut by accelerating its program of cutbacks but Howlin ruled that out too.
“I don’t see further austerity as being part of the bargaining chip on an interest rate deal,” he said.
“It would be entirely unreasonable if interest rate reductions that are available to others wouldn’t be available to ourselves ... We certainly don’t want to be treated and won’t accept treatment less favorable than other euro zone partners.”
Howlin reiterated that raising Ireland’s corporate tax was off the table but that the government would examine the effective rate of corporation tax with its European partners if that is what they wanted.
Dublin has consistently reminded other member states that while countries like France’s have a headline corporate tax rate of 34 percent, the effective rate paid by business is far lower.
Howlin, who held the health and environment portfolios when Labour last governed 14 years ago, is conducting a spending review of all government departments and said the results could change the proposed breakdown of next year’s budget.
Under its EU/IMF bailout, Ireland has agreed to impose 1.5 billion euros in extra taxes next year and cut spending by 2.1 billion but the minister said the composition of the headline 3.6 billion figure was not set in stone.
The former school teacher added that while he expected a deal ring-fencing public sector pay in return for public sector savings to deliver on target, he would be introducing measures in the coming weeks to cap the pay of high earners.
“You can be certain that the notion of asking people on the top level of income in the public sector to do greater burden sharing is very much on this government’s agenda,” Howlin said.
Howlin, who commended the public for their forbearance in accepting radical changes to their living standards while riots broke out in Greece, said Ireland’s debt was sustainable but that it was in all of Europe’s interests to keep it that way.
“We have to get back to a balanced budget or as close to it as soon as we can but we also have to have an economy that is growing because otherwise we are in a spiral of despair.”
Editing by Carmel Crimmins/Ruth Pitchford