LONDON (MNI) – Ireland “will likely” receive a large loan from the
European Union and the International Monetary Fund, Ireland’s central
bank governor said Thursday.

Talking on RTE radio, Patrick Honohan said the loan would likely
be large and designed to show Ireland’s firepower to the financial
markets.

“It will be a large loan, as the amount to be made available to
borrow is designed to show Ireland has sufficient firepower to deal with
any concerns of the market,” he said.

Honohan could not confirm a loan would be made, but said it was
his own belief that the presence of negotiating teams in Dublin from
international agencies suggested something was afoot.

“It’s not my call, it’s the governments decision in the end. But
it’s my expectation that it is definitely likely to happen. That is why
the large technical teams are sitting down discussing these matters and
think this is the way forward”, he said.

“The expectation is on their part (IMF et al) – and personally on
my part – that discussions will be effective and a loan will be made
available and drawn down as necessary. I’m not the government, but I
know these talks are serious talks and the EU, IMF and ECB will not send
large teams if they didn’t believe this was something they could put in
an acceptable package to the Irish government and people,” he added.

But Honohan insisted that Ireland would be receiving a ‘loan’
rather than a ‘bailout:

“The IMF provides loans, not bailouts. Loans get repaid. If agreed,
the IMF will give us a loan,” he said.

Honohan also confirmed any loan would be to restore confidence to
the battered Irish banking system and international partners.

“The purpose of this whole exercise is to offer reassurance to our
partners in Europe and internationally that the policies the government
is and will adopting will get us back on a stable and best trajectory –
to provide assurance to the investors and depositors in the banks that
outside examiners are satisfied that the banks have adequate capital
resources.”

He also confirmed any loan would be “large”, although he did not
know the exact amounts, adding that it would “be in tens of billions
(euros).”

Following recent news of outflows from the Irish banking system,
Honohan said:

“There have been substantial outflows from the Irish banking system
since April, that is a matter of common knowledge. Very large investment
funds, largely abroad, have removed funds as Ireland’s ratings fell.

“All those funds were replaced by borrowings and funds from the
ECB. There has been a steady drain of deposits, but this is something
for which the banks have facilities,” he said

Honohan also confirmed press reports that there have been funds
supplied additionally from the Irish central bank, but said he couldn’t
talk about the issue on a current basis.

“However, I would have to ensure other ECB council members didn’t
object to me making such loans,” he added.

Questioned on what the likely cost of the IMF loan would be,
Honohan said he could not be precise, but agreed it would probably be
in the region of 5%.

“We know clearly the IMF’s procedures on their lending. The
European Financial Stability Fund’s exact rate of interest hasn’t been
agreed. But in broad terms its seen to be in the same range as the IMF
facility. That is likely to be around 5% in broad terms, but gets
complicated as some of the lending is in SDR’s and some is in euros,” he
said.

–London ++207 862 7499, ukeditorial@marketnews.com

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]