Irish Bailout Details

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”