EU-IMF Bailout Interest Rates and the 2012 Budget

The interest rates on the bailout  loans  to Ireland from the IMF and EU will be decreased it was announced this week.  Irish  Minister for Finance Michael Noonan has said that the deal was a very significant step for Ireland which made the outlook for budgets in the coming years less harsh.

He said that the  Budget for 2012 would still have to contain savings of about two-thirds of those achieved in 2011. The original  adjustment package of €3.6 billion for is still looking likely – but  the revised nailout rates may mean  it will not be necessary to have an adjustment of about €4 billion- which was mentioned in June .
As well as lower rates – the new terms include   a commitment that if  “bailed out “countries continue to fulfil the conditions of their austerity programme, the European authorities will continue to supply them with money even when the programme concludes.

The EU appears to have given Greece, Ireland and Portugal – and any other country that may need to be bailed out – an indefinite commitment of financial support.

The two percentage point cut in the interest rate tat Ireland State pays on the main bailout fund is likely to save between €600 million and €800 million a year . A similar cut to the rate  on a second bailout fund which is likely to follow could see the total reduction in payments savings climb to over €1 billion a year.