Having tried to use the Greek crisis as leverage for a change in the terms of their bailout deal, Ireland are now looking to the UK for support by renegotiating their bailout interest rates with them (article here).

Ireland does have some extra bargaining power in negotiating with the UK that it doesn’t have with the rest of the EU. The proximity with the UK and the wide range of close governmental ties gives Ireland some “Network” bargaining power – special access to a powerful network. Ireland also has some niche marketing power with the UK by dint of being such a significant trading partner.

The UK can ill afford Ireland to default on its loans and this reassurance need can be exploited by the Irish – who can blame them for trying to make the most of this during the Queen’s visit. However the UK rate of interest is pretty close to the average EU rate of interest being charged to Ireland. So, whilst it’s plausible that Ireland may squeeze a minor interest rate cut out of the UK, it’s unlikely that the UK rate will be dropped below the EU rate, which will probably mean that the EU is not put under serious pressure to reduce its own rates to Ireland at the moment.