Ireland & Portugal Granted Extensions

When market rates for borrowing on sovereign debt markets became excessive for Ireland and Portugal, in turn, both nations were forced to turn to fellow members of the Eurozone and the IMF in order to secure bailout funding. Under the terms of the original agreements, Ireland was required to repay its loan later this year whilst Portugal’s debt falls due next year.

During a meeting of EU Finance Ministers in Dublin, it was decided that both Ireland and Portugal would be granted a further period of seven years to repay their loans. The decision needs to be ratified by the full membership of the EU, but that is regarded as a formality. The purpose of the extensions is to give the two economies longer to recover from their debt problems. Portugal and Ireland were both commended on their successes in implementing the EU/IMF/ECB bailouts which came with conditions attached.

The extension could mean that the two nations can include economic measures which are intended to boost growth rather than policies designed to cut government expenditure through austerity measures. Portugal’s austerity plans were dealt a setback when the Constitutional Court ruled several of the measures to be unlawful. It received a bailout of €78 billion whilst the Irish package was worth €85 billion.

The same meeting approved the €10 billion package for Cyprus, but made it clear that additional funds would not be available. Since the loan was agreed, estimates for the funds that Cyprus needed to raise itself have risen by a further €6.5 billion. Cyprus may ask for additional funding through European funds for growth and social cohesion. These funds would presumably free-up national resources which could be used to raise the financing required for resolving the crisis in Cyprus's banking sector.