MEP wants UK to pay interest profit to Ireland
The UK should pay back Ireland any significant profit it makes from charging high interest rates in its £7bn (€8.3bn) bailout of the country, a senior Liberal Democrat MEP said today.
Sharon Bowles, chair of Economic and Monetary Affairs Committee in the European Parliament, said it would give Ireland an incentive to pay back its loan. The initiative would extend to Eurozone countries which contributed to the £72bn (€85.7bn) bailout last month.
If other Eurozone member states such as Portugal and Italy need a bailout, they should also be eligible to receive a premium from lenders once the money is paid back, Ms Bowles said.
Introducing the measure would calm market doubts about a country’s ability to pay back the loan, she said, adding countries lending money should be able to make a small profit.
Ms Bowles said: “Fellow EU countries should be acting out of solidarity with their neighbours, not like investment banks.
“It is fair that a country sponsoring a rescue package should not be out of pocket, and should be guarded against risk, but that does not mean they have to pocket windfalls.
“I propose the profit, or premium, which sponsoring countries currently make out of the high interest rate, and that is higher than the cost to them of providing the loan, should be returned to the borrowing country once they have repaid their debt in full.
“These premiums should be kept in a pool that acts as insurance against default. I suppose it’s a bit like a no claims refund.”
She added: “The overall health of the EU economy will be much more viable and sustainable if struggling countries get these premiums back, rather than letting better off countries pocket them.
“Also, markets would respond to the likelihood of the borrowing country winning back the pool. It is far more important that we find tools such as this to build sustainable economies across the EU than risk forcing struggling countries into worse off positions.”
The UK lent Ireland £3.25bn (€3.87bn) directly at an interest rate of 5.9%, with the remainder of the loan incorporated in to the Eurozone’s bailout at an average interest rate of 5.8%.
Ministers hope the UK will make £400m (€476m) from its bi-lateral loan to Dublin. Chancellor George Osborne previously insisted it was necessary given the strong links between the British and Irish economies.
If Ireland meets its payments, it will pay off the £72bn (€85.7bn) loan by 2018. Antonio Jose Cabral, a senior adviser to the president of the European Commission, Jose Manuel Barroso, has said he welcomes the measure if it makes Eurozone countries more fiscally responsible.
