Skip to main content

Ireland To Be Crippled By €10bn A Year Interest...

THE country is facing crippling interest payments of €10 billion a year after the European Union and IMF agreed to an €85bn rescue package to fund the economy for the next three years.

The bulk of the money, €50bn, will be used to pay for the day-to-day running of the country.

The banks will receive €8bn immediately to restore their cash reserves; €2bn will be on standby and a further €25bn will be available if and when they need it.

The money will come from the IMF, our Euro area partners and loans from Britain, Denmark and Sweden.

In addition, the country has been told to take €12.5bn from the National Pension Reserve Fund and use €5bn the NTMA had already borrowed to pay for early 2011.

The expected average interest rate for the bailout will be 5.83%.

By 2013 the national debt is expected to rise above €200bn and by then almost a quarter of all taxes raised will be used to pay interest service costs.

At the end of the term this is expected to have climbed to €9.66bn a year if the banks have drawn down the full amount of capital. In return, Ireland has not been ordered to raise its corporation tax and it has been given an extra year to get its borrowing levels back within targets for the eurozone.

Senior bondholders in the banks will not have to absorb any losses, after this proposal was blocked in Europe because it was feared the move would undermine the stability of the entire financial system.

Taoiseach Brian Cowen said the agreement was "the best available deal for Ireland".

He said the interest rate was cheaper than Ireland could have got on its own and the deal was "necessary to allow us to fund our budgets over the coming years".

Fine Gael finance spokesman Michael Noonan said the interest rates meant the country was "sold out" in the negotiations.

Labour leader Eamon Gilmore said the IMF and EU walked over a Government without backbone or authority.

The details first emerged in Brussels at 6.15pm yesterday when Luxembourg’s Prime Minister Jean Claude Juncker announced the deal between Europe’s finance ministers had been struck.

Twenty minutes later Mr Cowen addressed a press conference at Government Buildings and spelled out how Ireland would be funded up to 2013.

The agreement demands that Ireland broadly sticks to the terms of the four-year plan announced last week, introduces a property tax and raises the pension age.

A fiscal responsibility law will have to be imposed on Government and an advisory council on budgetary affairs established.

The minimum wage will have to fall by €1 an hour and employers will be given greater scope to plead an inability to pay.

Future governments will also be restricted during the lifetime of the deal. If they raise any revenue not budgeted for, it will have to go towards paying debt rather than additional services.

In terms of the banks, €10bn will be made available straight away. Of this €8bn will be channelled into the institutions directly and €2bn as a short- term contingency fund.

From the immediate €8bn pot the Central Bank said Allied Irish Bank will get €5.2bn, Bank of Ireland €2.2bn, EBS €438m and Irish Life and Permanent €98m.

A further €25bn will be available for the banks to be drawn down when they require and after the Central Bank enforces new capital requirements.

The amount of money the banks take from the remainder of the fund will be added to the national debt and this will increase interest costs.

The breakdown of the rescue package means that €12.5bn will be taken from the National Pensions Reserve Fund and €5bn from our own cash reserves. The European Commission’s stabilisation fund will supply €22.5bn.

The Euro area’s emergency stabilisation fund will also lend us €17.7bn; Britain will offer €3.8bn; €390m will be given by Denmark and Sweden will lend us €598m.

The IMF will provide €22.5bn in a term of up to 10 years, with a minimum interest rate of 3.1% based on the current market. Head of the IMF team in Ireland Ajai Chopra said he was confident the Government will pass the budget on December 7.

He also said the open and flexible nature of our economy meant it was in a "much better situation than many others to rebound quickly".



Report by Conor Ryan, Paul O’Brien, Ann Cahill and Brian O’Mahony - Irish Examiner

Popular posts from this blog

Ireland's Celtic Tiger Excesses...

'Bang twins' may never get to run a business again... POST-boom Ireland is awash with cautionary tales of Celtic Tiger excesses, as a rattle around the carcasses of fallen property developers and entrepreneurs will show. Few can compete with the so-called Bang twins for youth, glamour and tasteful extravagance. Simon and Christian Stokes, the 35-year-old identical twins behind Bang Cafe and exclusive private members club, Residence, saw their entire business go bust with debts of €9m, €3m of which is owed to the tax man. The debt may be in the ha'penny place compared with the eye-watering billions owed by some of their former customers. But their fall has been arguably steeper and more damning than some of the country's richest tycoons. Last week, further humiliation was heaped on them with revelations that even as their businesses were going under, the twins spent €146,000 of company money in 18 months on designer shopping sprees, five star holidays and sumptu

I fear a very different kind of property crash

While 80% of people over 40 own their own home just a third of adults under 40 do. This is disastrous for social solidarity and cohesion Changing this system of policymaking requires a government to act in a way that may be uncomfortable for some. Governments have a horizon of no more than five years, and the housing issue requires long-term planning. The Department of Public Expenditure and Reform was intended to tackle some of these problems. According to its website its remit is to “drive the delivery of better public services, living standards and infrastructure for the people of Ireland by enhancing governance, building capacity and delivering effectively”. So how is the challenge of delivering homes for people in 2024 and beyond going to be met? The extent of the problem is visible in the move by companies, including Ryanair, to buy properties to house staff. Ryanair has, justifiably, defended its right to do so. IPAV has long articulated its views on how to improve supply an

Property Tycoon's Dolce Vita Ends...

Tycoon's dolce vita ends as art seized... THE Dublin city sheriff has seized an art collection and other valuables from the Ailesbury Road home of fallen property developer Bernard McNamara. The collection will be sold to help pay his debts. The sheriff, Brendan Walsh, is believed to have moved against the property developer within the past fortnight, calling to his salubrious Dublin 4 home acting on a court order to seize anything of value from his home to reimburse his creditors. The sheriff is believed to have taken paintings from the family home along with a small number of other items. The development marks a new low for Mr McNamara, once one of Ireland's richest men but who now owes €1.5bn . The property developer and former county councillor from Clare turned the building firm founded by his father Michael into one of the biggest in Ireland. He is the highest-profile former tycoon to date to be targeted by bailiffs, signalling just how far some of Ireland's billionai