DUBLIN - Despite bluster from opposition parties, Irish lawmakers voted Wednesday to back the euro67.5 billion (US$90 billion) international rescue for Ireland, an emergency measure designed to keep Europe's debt crisis from getting worse.
Opposition leaders had complained fiercely about the high interest rates that other European Union partners were demanding from Ireland to help the country cope with its massive bank bailout.
But Prime Minister Brian Cowen argued that Ireland had no choice but to take loans from the European Union and International Monetary Fund at interest rates averaging 5.8 per cent because bond investors were demanding "far, far higher rates." His finance chief dismissed opposition claims they could have gotten a better rate as "laughable."
A motion endorsing the Nov. 28 loan accord passed on an 81-75 vote, clearing the way for the Washington-based IMF to ratify its euro22.5 billion (US$30 billion) part of the aid package.
Ireland faces a 2010 deficit of 32 per cent of gross domestic product, a post-war European record that includes exceptional costs of bailing out five Dublin banks. The Irish government plans to plow the first euro10 billion (US$13.3 billion) from the EU-IMF fund straight into the cash reserves of those banks, all of which have been nationalized or partly acquired by the state since 2008, when Ireland's property-weighted economy took a nosedive.
Another euro50 billion (US$67 billion) from the fund will be gradually tapped to cover government red ink through 2014, when Ireland hopes its deficit can be clawed back to 3 per cent of GDP, the eurozone limit.
Finance Minister Brian Lenihan said the rest of the loans will be kept on hold and used to support Dublin's banks only if their writeoffs of overpriced real estate loans worsen beyond the current estimate of euro45 billion (US$60 billion).
Lenihan said opposition leaders calling for substantial loan defaults were "living in fantasy land." He said Ireland would do nothing to deter the foreign investors responsible for 1,000 multinational companies employing 250,000 people in Ireland.
He said nations that have reneged on foreign loans, such as Iceland and Argentina, could do so only because they had their own currencies and domestic central banks. He said Ireland could not expect any support from the European Central Bank in Frankfurt if it failed to honor its debts, since a Dublin default would send devastating shock waves throughout the 16-nation eurozone.
Before the vote, opposition chiefs accused Cowen of striking an unnecessarily expensive bargain -- and eurozone heavyweights Germany and France of seeking to profit from Ireland's misery.
The parliamentary leaders of the three opposition parties -- Fine Gael's Enda Kenny, Labour's Eamon Gilmore and Sinn Fein's Caoimhghin O Caolain -- accused EU partners of tacking nearly 3 percentage points of "penalty" interest on one third of the loan package.
They said the charge exceeded the EU nations' own financing costs by euro5 billion (US$6.7 billion) over the life of the loan, a profit that will be funded by Irish taxpayers. Gilmore said EU nations were violating the spirit of EU treaties, which say emergency aid should be provided in "a spirit of solidarity."
O Caolain said the loans were too big and expensive to repay for this country of 4.5 million and amounted to "economic bondage."
Cowen and Lenihan dismissed the complaints as nonsense. They said EU financial chiefs in May, meeting to forge a euro110 billion (US$146 billion) bailout for Greece, agreed that any future bailouts would command an interest-rate "premium" equivalent to the rates charged by the IMF.
"The suggestion that the opposition could negotiate a better interest rate from the IMF is, frankly, laughable," Lenihan said. "The rate of interest charged by the IMF is calculated using the standard formula, which it applies to all countries."
Cowen has won a series of parliamentary votes over the past week connected to his government's 2011 budget. It seeks more than euro4 billion (US$5.3 billion) in cuts and nearly euro2 billion (US$2.7 billion) in tax increases in a country already struggling with 13.6 per cent unemployment.
Ireland's day-to-day finances are in terrible shape, with euro50 billion (US$67 billion) in spending this year being covered by just euro31 billion (US$41 billion) in taxes. The massive shortfall reflects Ireland's excessive past reliance on tax income from property sales -- a craze of the 1994-2007 Celtic Tiger boom that has given way to despair.
The Irish government recently published a four-year plan that seeks to slash its annual deficits by euro15 billion and reach a 2014 deficit target of 3 per cent of GDP. European officials, skeptical of Irish forecasts, have extended the GDP deadline to 2015.
