Two proposals have been adopted by the European Commission that will reduce the interest rate and extend the maturities on loans to Ireland and Portugal under the European Financial Stabilisation Mechanism.

It is expected the proposals will be approved by the council within coming weeks.

The proposal could save Ireland up to €658m a year in interest payments.

This is separate from the reductions in Ireland's interest rates agreed in July by EU leaders.

That covered money from the European Financial Stability Facility (EFSF), which comes from eurozone governments.

They will reduce the interest rates paid by Ireland and Portugal to bring them in line with the cost to the EFSM of borrowing the money. This means Ireland will no longer pay an additional 2.9%.

The maturity of the loans will be extended from the current maximum of 15 years to up to 30 years.

It will make it easier for the NTMA to organise its repayment schedule for Government borrowing, reducing the amount that has to be refinanced in any given year.

This should make it easier for the State and banks to borrow from financial markets.

The average maturity of the loans to Ireland from the EFSM go up from the current 7.5 years to 12.5 years.

The EFSM is contributing €22.5bn to Ireland's bailout package. Ireland has drawn down €11.4bn from the fund so far.

Commissioner distances himself from flag idea

Meanwhile, German Energy Commissioner Günther Oettinger has continued to try to distance himself from an interview in which he reportedly suggested bailout countries like Ireland should have their flags flown at half mast.

The Commissioner's spokeswoman Marlene Holzner told journalists in Brussels that the idea was not Mr Oettinger's, he did not support it nor had he recommended it to the Commission President.

Ms Holzner said that this idea came up during an interview in Berlin, in which the Commissioner was talking about a number of options which were under discussion.

The suggestion that flying flags at half mast would deter countries from getting into debt has been widely derided.

Speaking on Morning Ireland, Irish MEP Mairead McGuinness was highly critical of the Commissioner.

Meanwhile, a cross-party group of over 150 MEPs have written to European Commission president José Manuel Barroso calling for Mr Oettinger to retract his statement or resign as EU Commissioner.

The initiative was organised by Portuguese Greens/EFA MEP Rui Tavares.

The letter will be presented to Parliament president Jerzy Buzek by Greens/EFA co-president Dany Cohn-Bendit.