The Irish government will offer European Union leaders a deal on sovereign debt in return for support in a referendum on budgetary reform within the Eurozone.
Junior Minister Brian Hayes has publicly admitted that a Yes vote in the proposed referendum could be achieved if the EU can cut a deal to reduce the interest charged on Ireland’s bail-out.
“It will be difficult for a referendum to be passed on the new EU budget plans if a better deal on our debt burden isn't struck,” admitted Minister of State at the Department of Finance Hayes.
“In the context of such a vote, it is important that the EU authorities cut Ireland a better deal which would see repayments on some debt stretched out over a longer period of time with a lower interest rate.
“An additional deal, which would help reduce the country's onerous debt burden, would have to be put in place if a referendum is to take place.”
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Media outlets in Dublin have reported that the Coalition government will look to swap support for an interest rate reduction as the EU needs Ireland to recover quickly from the collapse of the Celtic Tiger economy.
The Cabinet is to discuss draft plans for tough new budgetary rules for members of the Euro at its last meeting before Christmas on Tuesday with many pundits predicting that a referendum will be needed to bring in the strict budget deficit law across Europe.
Ireland’s Finance Minister Michael Noonan is to participate in a conference call with Eurozone finance ministers when the deal is expected to be discussed.
Government sources have already warned the EU that it would be difficult to pass a referendum without the ‘sweetener’ of a debt repayment agreement.
A fortnight ago, Prime Minister Enda Kenny demanded a deal on reducing Ireland’s banking debt as part of an agreement on tough new rules for euro membership.
“It is in Europe’s interest to help Ireland recover, emerge from the bailout and return to the international markets,” said a government spokesman.
“At the European summit, the Taoiseach (Prime Minister) asked colleagues for support in making the burden taken on as a result of the steps we have taken to recapitalise our banks more manageable. That continues to be the Government position.
“It will take some time before the Attorney General can make conclusions regarding a referendum.”