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DUBLIN (AP) â¿¿ Ireland clinched a long-sought agreement Thursday with the European Central Bank to restructure the loans used to bail out its failing banks, a deal expected to reduce the national debt by â¿¬20 billion ($27 billion) in the coming decade and help the country's expected exit from its own international bailout.
Red-eyed lawmakers applauded Prime Minister Enda Kenny as he announced the breakthrough after more than a year of negotiations with ECB governors. The deal should allow Ireland, which has imposed severe austerity measures since 2009, to reduce planned cuts and tax hikes in coming years.
His announcement came hours after lawmakers voted to dissolve a government-owned "bad bank," the Irish Bank Resolution Corp. â¿¿ the focal point for Ireland's divisive 2010 agreement negotiated with the ECB to repay foreign bank bondholders in full. That agreement had required Ireland to make annual repayments of â¿¬3.06 billion ($4.1 billion) through 2023 and more payments through 2031 totaling â¿¬48 billion, including 8 percent interest.
Kenny said ECB governors had agreed to replace that crippling formula with new Irish government bonds that won't need to be repaid for a generation. He said Ireland for more than two decades would pay only the annual interest-rate payments, or yields, on the bonds until they start maturing in 2038, sharply reducing current payments and shaving more than â¿¬1 billion ($1.35 billion) off next year's budget deficit.
"In effect, we have replaced a short-term, high-interest-rate overdraft that had to be paid down quickly through more expensive borrowings, with long-term, cheap, interest-only loans," Kenny said.
Finance Minister Michael Noonan said the annual yields of the bonds would float in line with market expectations, currently between 3 percent and 3.5 percent, reflecting Ireland's improving reputation among foreign creditors as a country that pays its bills and doesn't default.