Brian Cowen has just announced that the European Union has approved an €85 billion rescue package over 7 years for Ireland- which, if drawn down in its entirety today, would attract an average interest rate of 5.83%.
That equates to €18,888 per person in Ireland.
€5 billion will come from the Irish government’s cash holdings and €12.5bn from the National Pension Reserve Fund . A total of €67.5bn is to be provided by external assistance – (€22.5 billion from the IMF and €45bn from the EU )
€10 billion will be used straight away to recapitalise the banks, with a €25 billion contingency , and the remaining €50 billion will be used for the budgetary requirements of the State.
The funds will come from a combination of the International Monetary Fund, the 16 eurozone nations and the European Commission also Britain, Sweden and Denmark have also offered loans.
The breakdown of the loan – is €22.5 billion from the European Financial Stability Mechanism (EFSM); €22.5 billion from the International Monetary Fund (IMF); and €17.5 billion from the European Financial Stability Fund (EFSF)
€3.44billion is coming from the UK , €393m from Denmark and €598m from Sweden
The funding will be provided in quarterly tranches on the achievement of agreed quarterly targets.
Interest payments on the loan could be 20% of tax revenue in 2014 if all the money is drawn down.
There are unconfirmed reports that the interest rate charged by the EU will be around 6 per cent, wherease the IMF will charge just over 3 per cent for the first three years and 4 per cent for the subsequent three years.
As part of the deal Ireland has been given an extra year – until 2015 – to meet its target of reducing its budgetary deficit to 3 per cent.
As part of the Programme, Ireland will discontinue its financial assistance to the Loan Facility to Greece. This commitment would have amounted to approximately €1 billion up to the period to mid-2013. (Greece is paying 5.2% on their bailout)
During the press conference – the Deputy Prime minister of Ireland – Mary Coughlan was turning on the Christmas lights in Donegal (alongside Santa !!)
IMF chief Dominique Struass-Kahn confirmed that the IMF will contribute €22.5bn to Ireland’s bailout, and said it is likely to be approved by the IMF board in December. He said “The strategy for the financial system rests on twin pillars: deleveraging and reorganization; and ample capitalization. ” …..
“‘A fundamental downsizing and reorganization to restore the viability of the system will commence immediately”