LONDON — Ireland sealed a deal with the European Central Bank Thursday to ease the cost of its bailout of failing banks, keeping the country on track to wean itself from international emergency loans.
By restructuring the repayment of the debt it incurred to rescue the banks, Ireland will be on track by year-end to be able to borrow money on the open market as most other governments do. It was essentially shut out of that market at the end of 2010, when the cost of the bailout forced Dublin to ask for help from 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 said. “It secures the future financial position of the state.”
Under the new deal struck with the European Central Bank, the Irish government has the 40 years, instead of less than half that, to pay off the cost of rescuing the banks that failed in the country’s overheated property market. The interest rate on the debt is also to be significantly cut. The agreement will save Ireland about $27 billion over the next decade alone.
Lawmakers in Dublin applauded Kenny’s announcement of the agreement, despite being tired from an all-night session during which they voted to dismantle 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 new debt-repayment deal. President Michael D. Higgins was called back from Italy to sign the bill into law.
The new deal came out of protracted negotiations with the European Central Bank. Kenny was elected in 2011 on promises that he would get more favorable repayment terms for Ireland from the ECB.