Ireland is to receive better financial terms on the money it is receiving under the EU/IMF bail-out programme from a fund controlled by the European Commission.

The decision, approved by the Commission this morning, covers money from the European Financial Stabilisation Mechanism (EFSM).

This is separate from the reductions in Ireland's interest rates agreed in July by EU leaders. This covered money from the European Financial Stability Facility, which comes from euro zone governments.

The proposals adopted by the Commission this morning are expected to be approved in the coming weeks.

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 percentage points. The reduction will apply to money already drawn down by Ireland. The proposal could save Ireland up to €600m a year in interest payments.

The average term of the loans is also being extended from the current 7.5 years to 12.5 years.

The EFSM is contributing €22.5 billion to Ireland's bail-out package. Ireland has drawn down €11.4 billion from the fund so far.