By Henry Chu
1:41 PM PST, February 7, 2013
LONDON — Ireland sealed a deal with the European Central Bank on Thursday to ease the crippling cost of its public bailout of failing banks, keeping the country on track to wean itself from international emergency loans.
By overhauling repayment of the debts it incurred to rescue its banks, Ireland will be on track by the end of 2013 to be able to borrow money on the open market the way most other governments do. It was effectively shut out of those markets at the end of 2010, when the gaping hole ripped into its budget by the bank bailout forced Dublin to go cap in hand to its European partners and the International Monetary Fund.
“Today’s outcome is an historic step on the road to economic recovery,” Prime Minister Enda Kenny told lawmakers Thursday. “It secures the future financial position of the state.”
Under the new deal struck with the European Central Bank, the Irish government now has the next 40 years, instead of less than half that, to pay off the cost of rescuing the banks that went spectacularly bust in the country’s overheated property market. The interest rate on those debts is also to be dramatically cut. All told, the agreement will save Ireland about $27 billion over the next decade alone.
That’s welcome news for a nation that has been subjected to repeated rounds of austerity cuts. Public servants have seen their salaries slashed, young Irish are emigrating in droves and the once-roaring Celtic Tiger is now whimpering from a deep economic recession.
Lawmakers in Dublin applauded Kenny’s announcement of the agreement, despite being tired and bleary-eyed from an all-night session during which they voted to dismantle the Irish Bank Resolution Corp., one of the “bad banks” set up by the government to deal with toxic assets. That move was a prerequisite for the debt-repayment overhaul; Ireland President Michael D. Higgins was called back from an official trip to Italy to sign the bill into law immediately.
The new deal came out of protracted negotiations with the European Central Bank. It was a must-win for Kenny, who was voted into power in 2011 on promises that he would wrest more favorable repayment terms for Ireland from the ECB.
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