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What bailout loan extension may mean

Tuesday, March 05 12:37:50

Last night's Eurogroup meeting of finance ministers agreed in principal to extend the term of Ireland's EU bailout loans, which will smooth a substantial hump in Ireland's medium-term funding requirements, analysts say.

Economists at Davy's expect that at least a rescheduling E10.5bn of EFSF/EFSM loans due to mature in 2015-2016 will now be considered.

However, there has been no sign that EU moves will be followed by the IMF, with around E18bn of IMF loans due to mature by 2020.

In total, E6.3bn of EFSF/EFSM loans are due to mature in 2015, E4.2bn in 2016, E3.9bn in 2018 and E1bn in 2019.

"We expect at least E10.5bn of EU loans due to mature in 2015-2016 will be rescheduled to ease Ireland back into regular market access. This compares with the E40bn Ireland had been expected to have to raise during these years. The recent deal to replace the promissory notes with long-term government bonds, funded by extended ECB support, will reduce funding needs in 2015-2016 by a further E5.2bn. Likely funding needs for 2015 alone have been halved from E18bn to E9bn since the Budget in December," said Davy.

"For now, there has been no sign that extended EU funding support will be joined by similar moves from the IMF, with around E18bn of loans due to mature by 2020. Nonetheless, last night's agreement is a welcome development, likely to smooth a substantial hump in Ireland's funding requirements in 2015-2016."