Ireland to Borrow at 5.8%

MrMatisse

Here it is

http://www.irishtimes.com/newspaper/breaking/2010/1128/breaking1.html

Were putting in 17bn from the NPRF? Didnt realise that.

Mr.Micro

Really-Stressed wrote: »

Here it is

http://www.irishtimes.com/newspaper/breaking/2010/1128/breaking1.html

Were putting in 17bn from the NPRF? Didnt realise that.

Well they sold out on everything else, the family silver can only be sold once. 85 billion in the hands of these incompetents....

ei.sdraob

20% of tax income by 2013 will go to just service debt said Brian

great stuff there :rolleyes: more waste of my taxmoney

Kintarō Hattori

Why are we paying a higher interest rate on a smaller amount than Greece?

silverharp

I love the spin by Clown " it like 92/93 " , I wonder what private sector borrowing was like then versus now. Kicking the can down the road, nothing more, nothing less

Mr.Micro

Kintarō Hattori wrote: »

Why are we paying a higher interest rate on a smaller amount than Greece?

My answer to that would be look who are in charge....the Blues Brothers.....aka Biffo and Lenny.

ei.sdraob

people, the keyword in all those announcements was 5.8% variable

knowing FFs negotiating and financial forecasting history, you can bet the real figure in the end will end-up being much higher

viconia

"blended rate"

Anonymous1987

The 5.8% is referred to the average interest rate, considering €17.5bn will be funded by the NPRF, can we assume the 5.8% refers to the total €85bn with €17.5bn of that effectively interest free meaning we are actually paying a much higher interest rate for the €67.5bn of about 7.3%.

zig

Anonymous1987 wrote: »

The 5.8% is referred to the average interest rate, considering €17.5bn will be funded by the NPRF, can we assume the 5.8% refers to the total €85bn with €17.5bn of that effectively interest free meaning we are actually paying a much higher interest rate for the €67.5bn of about 7.3%.

I would love to know if this is true, they surely cant be taking our pension reserve fund into account here!!

bondjames

Really-Stressed wrote: »

Here it is

http://www.irishtimes.com/newspaper/breaking/2010/1128/breaking1.html

Were putting in 17bn from the NPRF? Didnt realise that.

yes for the banks
the banks are f*****G taking every penny from this country
They should be burned to the ground

bondjames

Mr.Micro wrote: »

Well they sold out on everything else, the family silver can only be sold once. 85 billion in the hands of these incompetents....

They should have told them 4% or we will take the euro down with us
Germany would have had most to loose if we went down

Ren2k7

Why is the media referring to the bailout amount as 85 billion when we're contributing 17.5 billion to the fund.

zig

Ren2k7 wrote: »

Why is the media referring to the bailout amount as 85 billion when we're contributing 17.5 billion to the fund.

Well I guess were bailing out ourselves as well.

Anonymous1987

bondjames wrote: »

They should have told them 4% or we will take the euro down with us
Germany would have had most to loose if we went down

I agree. The Eurozone need us as much as we need them.

thebman

zig wrote: »

I would love to know if this is true, they surely cant be taking our pension reserve fund into account here!!

Oh its true, I was listening careful for that.

The inclusion of the NPRF is to make the rate look lower than it is :rolleyes:

Cowen even said himself during question time that when we start to utilize the fund, rates will be 6% and knowing this government, that means between 6 and 7%!

Scofflaw

Kintarō Hattori wrote: »

Why are we paying a higher interest rate on a smaller amount than Greece?

Longer loan period - Greece's loan was for three years only, ours is for 9 years.

cordially,
Scofflaw

zig

thebman wrote: »

Oh its true, I was listening careful for that.

The inclusion of the NPRF is to make the rate look lower than it is :rolleyes:

Cowen even said himself during question time that when we start to utilize the fund, rates will be 6% and knowing this government, that means between 6 and 7%!

But surely, you should be arguing that your only paying interest on whatever money you take.

E.g. Just say your stuck for a tenner, I offer you 8 euro at 10% interest, you manage to find 2 euro from somewhere, so that means you now have your 10 euro. That doesnt mean your paying me back a tenner with 10% interest, just the 8?

thebman

zig wrote: »

But surely, you should be arguing that your only paying interest on whatever money you take.

E.g. Just say your stuck for a tenner, I offer you 8 euro at 10% interest, you manage to find 2 euro from somewhere, so that means you now have your 10 euro. That doesnt mean your paying me back a tenner with 10% interest, just the 8?

Yes but that money has nothing to do with the bail out package in reality. It is included to make this bailout look more appealing to us as they know everyone is watching the interest rates.

The extra money included is basically the money we are using to fund ourselves next year so is means we are accessing our own part of the bail out fund now and will straight drawing down the actual fund later.

Its silly to say the money we had anyway is part of our own bailout fund. We can't bail ourselves out or we wouldn't need bailing out in the first place.

Scofflaw

thebman wrote: »

Yes but that money has nothing to do with the bail out package in reality. It is included to make this bailout look more appealing to us as they know everyone is watching the interest rates.

The extra money included is basically the money we are using to fund ourselves next year so is means we are accessing our own part of the bail out fund now and will straight drawing down the actual fund later.

Its silly to say the money we had anyway is part of our own bailout fund. We can't bail ourselves out or we wouldn't need bailing out in the first place.

Not sure about the NPRF inclusion being for that purpose - it seems too obvious a trick. One question and it blows the whole headline rate away. However, our current borrowings - the money we currently have on hand, that was borrowed on the open markets - is included.

On the other hand, the government statement certainly makes it look like that:

The Government today agreed in principle to the provision of €85 billion of financial support to Ireland by Member States of the European Union through the European Financial Stability Fund (EFSF) and the European Financial Stability Mechanism; bilateral loans from the UK, Sweden and Denmark; and the International Monetary Fund's (IMF) Extended Fund Facility (EFF) on the basis of specified conditions.

The State's contribution to the €85 billion facility will be €17.5 billion, which will come from the National Pension Reserve Fund (NPRF) and other domestic cash resources. This means that the extent of the external assistance will be reduced to €67.5 billion.

There's a lot of different sources there.

cordially,
Scofflaw

Cookie_Monster

they are saying the interest on these loans will be about 20% of tax revenue, so once you include the amount of yearly repayment that rises to about 40% of tax 68 bn over 9 years is about 7bn repayments a year + 8bn odd interest.... no?

Bob_Latchford

what is rationale of using Pension fund? If its "obviously a good idea as its saves money" why werent they using it instead of the bond markets up to now?

Liam Byrne

zig wrote: »

But surely, you should be arguing that your only paying interest on whatever money you take.

E.g. Just say your stuck for a tenner, I offer you 8 euro at 10% interest, you manage to find 2 euro from somewhere, so that means you now have your 10 euro. That doesnt mean your paying me back a tenner with 10% interest, just the 8?

But in FF double-speak, if the "average" interest on the €10 required is 10%, it means that you're actually paying 12.5% on the remaining €8.

So if we're "borrowing" 20% of the cash from ourselves @ 0%, and the average interest is 5.8%, it means that FF have signed us up to pay interest @ 7.25% !!!! :mad: :mad: :mad:

Duiske

I guess this means there is no chance of the interest rate on Irish bonds going below 5.8% during the lifetime of this agreement ?

Does anyone know what the interest rate was the last time we raised money on the bond markets ?

One thing this bailout is going to do is focus the minds of the new Government on jobs. Job creation is our only way out of this.

Bob_Latchford

someone on another thread worked out interest on new money to be 6.7%

FF really are mugging us off if they think including pension fund at 0% will last more than couple of hours after the announcement

ArtSmart

Scofflaw wrote: »

Longer loan period - Greece's loan was for three years only, ours is for 9 years.

cordially,
Scofflaw

Biffo mumbled something about 3 years. - maybe 7, em ,who's round is it?

amazing how he mumbles sometimes and is crystal clear the next. must be some kind of twitch

zig

Liam Byrne wrote: »

But in FF double-speak, if the "average" interest on the €10 required is 10%, it means that you're actually paying 12.5% on the remaining €8.

So if we're "borrowing" 20% of the cash from ourselves @ 0%, and the average interest is 5.8%, it means that FF have signed us up to pay interest @ 7.25% !!!! :mad: :mad: :mad:

I get what your saying but im still a bit confused, as in, if they say the average interest of the bailout is 5.8% of 85 billion , THEN I see what you mean, THEN we are defo paying >7%,
but Im not sure if they said its 5.8% of 85 billion or 5.8% of the money we borrow.

thebman

ArtSmart wrote: »

Biffo mumbled something about 3 years. - maybe 7, em ,who's round is it?

amazing how he mumbles sometimes and is crystal clear the next. must be some kind of twitch

We can draw them down over a 3 year period, we pay them back over 9 years AFAIK.

etcetc

Anonymous1987 wrote: »

The 5.8% is referred to the average interest rate, considering €17.5bn will be funded by the NPRF, can we assume the 5.8% refers to the total €85bn with €17.5bn of that effectively interest free meaning we are actually paying a much higher interest rate for the €67.5bn of about 7.3%.

ssshh

hmmm

Michael Noonan had a superb initial analysis on this. Because we will drawdown the money with the least interest charges first, there is an incentive for Ireland not to draw down the whole amount. If we manage to pull off the budget and get our deficit on a sustainable path, there is every chance we can go to the market for a lower interest rate and avoid having to draw down later tranches of the money.

Cardiff from the DOF alluded to this at the press conference when he said we were not excluded from raising funds from the market, in particular he said the option of raising short term money was available. You could quite quickly see Ireland be able to borrow at rates approaching 4/5% for short term maturities.

MagicMarker

Here's a bit of a breakdown....

http://namawinelake.wordpress.com/2010/11/28/the-bailout-details-emerge/

This post will be updated as more details are released from Brussels

(1) €85bn bailout – €50bn for the day to day running of the country. €35bn for the banks. €10bn immediately and €25bn as a contingency for the banks. Headline external bailout – €67.5bn because €17.5bn coming from Irish resources (€12.5bn from NPRF and €5bn from cash reserves).

(2) Of the €35bn for the banks, €12.5bn is to come from the NPRF. The NPRF has a value of ~€24.5bn of which ~€7bn is already invested in BoI/AIB preference shares. Announcement today will leave c€5bn in NPRF if contingency is drawn down.

(3) €3.44bn is coming from the UK at xx% for xx years, €393m from Denmark and €598m from Sweden.

(4) €10bn to be “invested” “immediately” in the banks – this was really about the banks.

(5) Statement from Central Bank of Ireland expected shortly regarding recapitalisation of the banks – €10bn immediately. AIB expected to be 100% nationalised. Speculation that both BoI and ILP will be in majority State control.

(6) “Blended” interest rate of 5.83% combined – RTE citing “government sources”, Four year plan assumption was 6%

(7) We have been given an extra year to meet 3% deficit:GDP – RTE.

(8) Average length of loans 7.5 years

(9) €67.5bn external assistance – €22.5bn from IMF and €45bn from EU including UK, Denmark, Sweden

(10) What about ECB funding – €90/100bn in the six State-guaranteed banks at 29 Oct 2010?

(11) “Best available deal for Ireland” – An Taoiseach

(12) Senior bondholders unaffected

(13) “wider application” of subordinated bondholder haircutting – that implies BoI and AIB.

(14) 118% debt:GDP in 2013 if €25bn bank contingency needed

(15) We potentially return to 1992 level of tax being used to service debt in “worst” situation

(16) “We’re out of bond markets for 2011 at any rate”

(17) Default would be a huge problem to euro banking system. Lehmans default had consequences far afield. We are a responsible country that has benefitted greatly from the reserves of the ECB.

(18) John Corrigan at the NTMA and governor Patrick Honohan key to negotiating deal (no mention of Matthew Elderfield).

(19) Jiggery pokery with banks – Regulator to tells banks cap requirements – banks to decide how to fund.

(20) Professor Constantin Gurdgiev – Yet another announcement on banks’ recap (same old same old) – bank recap at least €67bn (€32bn already plus €35bn into the facility). Still believes banks will be undercapitalised because of future mortgage losses. Believes default or restructuring will be required.

(21) ECB order banks to “deleverage” to replace emergency liquidity. Banks must therefore raise deposit rates therefore higher mortgage and lending rates in Ireland.

(22) Michael Noonan: EU have won the pool, Ireland has played a poor game here.

(23) Helpful if proposals are owned by Irish society – European Commission

(24) Ajai Chopra – Irish authorities have been proactive in finding solutions to fiscal/banking problems

BeeDI

zig wrote: »

But surely, you should be arguing that your only paying interest on whatever money you take.

E.g. Just say your stuck for a tenner, I offer you 8 euro at 10% interest, you manage to find 2 euro from somewhere, so that means you now have your 10 euro. That doesnt mean your paying me back a tenner with 10% interest, just the 8?

Pretty soon we will all be stuck for a tenner,

54kroc

So how much are the yearly repayments in total and how much is the interest each year?

Anonymous1987

According to the IMF they will be charging interest of "3.12 percent during the first three years, and just under 4 percent after three years"
Scroll down to the bottom of this for source

EDIT: The 3.12% refers to interest in SDR, the currency of the IMF which will be higher, maybe 3.6% or higher in Euro

Liam Byrne

Why is the NPRF even being included in the terms of the "bailout", considering it's already our own money ?

MrMatisse

If we want to default we now loose the nprf so would have 0 cash on hand.

Scofflaw

hmmm wrote: »

Michael Noonan had a superb initial analysis on this. Because we will drawdown the money with the least interest charges first, there is an incentive for Ireland not to draw down the whole amount. If we manage to pull off the budget and get our deficit on a sustainable path, there is every chance we can go to the market for a lower interest rate and avoid having to draw down later tranches of the money.

Cardiff from the DOF alluded to this at the press conference when he said we were not excluded from raising funds from the market, in particular he said the option of raising short term money was available. You could quite quickly see Ireland be able to borrow at rates approaching 4/5% for short term maturities.

Essentially, that means the package has a built-in structure that makes it far preferable to borrow for short periods, rather than trying to fund any unsustainable longer-term costs. That says "not really trustworthy with the money" - which is interesting, given they know we're likely to be having a change of government soon.

Full breakdown of who's lending us what:

Total Programme Volume|(Billions of euro)
Contribution by Ireland|17.5
External support| 67.5
Total|85.0

External Support Breakdown
IMF (One-Third)*| 22.5
Europe (Two-Thirds)|45.0
Total|67.5

European Breakdown
EFSM| 22.5
EFSF (Plus Bilaterals)| 22.5
Total|45.0

EFSF (Plus Bilaterals) Breakdown
EFSF (Effective) euro area| 17.7
United Kingdom|3.8
Sweden|0.6
Denmark| 0.4
Total|22.5

cordially,
Scofflaw

Scofflaw

Liam Byrne wrote: »

Why is the NPRF even being included in the terms of the "bailout", considering it's already our own money ?

It's included in "the programme" rather than the "external support"The former seems to be what we're committing to - with external support to help us do it.

IMF deals are always, as far as I know, in the form of a 'programme' for the country:

Building on the strong fundamentals of the Irish economy, the programme rests on three pillars: - An immediate strengthening and comprehensive overhaul of the banking system - An ambitious fiscal adjustment to restore fiscal sustainability, including through the correction of the excessive deficit by 2015 - Growth enhancing reforms, in particular on the labour market, to allow a return to a robust and sustainable growth, safeguarding the economic and social position of its citizens.

That's our dietary regime for the next 3-4 years.

cordially,
Scofflaw

MrMatisse

I wish they would clarify the breakdown of the rates per lender, were Sweden going to lend at 3%?

http://www.rte.ie/news/2010/1122/britain-business.html

podge3

hmmm wrote: »

Michael Noonan had a superb initial analysis on this. Because we will drawdown the money with the least interest charges first, there is an incentive for Ireland not to draw down the whole amount. If we manage to pull off the budget and get our deficit on a sustainable path, there is every chance we can go to the market for a lower interest rate and avoid having to draw down later tranches of the money.

Cardiff from the DOF alluded to this at the press conference when he said we were not excluded from raising funds from the market, in particular he said the option of raising short term money was available. You could quite quickly see Ireland be able to borrow at rates approaching 4/5% for short term maturities.

Come on now - there will be no more of those posts with a positive outlook.

Down with that sort of thing. We only want negative/doom & gloom etc

Inverse to the power of one!

amazing how he mumbles sometimes and is crystal clear the next. must be some kind of twitch

The same condition as O'Dea's stutter that only happens when hes interrupting someone......Hereditary to the party I suppose

Mayo Exile

This from the Irish Times:

Among the structural reforms set out in the document is the requirement to introduce a fiscal responsibility law with “binding multi-annual ceilings on expenditure in each area”.

Is this a move towards a balancing the budget requirement? If it is, it would stop incumbent governments from buying an election as FF so blatantly did in 2002 and 2007. Also hopefully would stop the opposition parties engaging in auction politics in an attempt to get into government.

flynnlives

85billion at 5.8% FF doublespeak = 4.93billion per year

now when you factor in that we are offering the NPRF at 0%, our own money it becomes the following:
85-17.5=67.5billion ie the true amount being borrowed!

So its in fact 67.5billion @ 7.3%

newmug

zig wrote: »

I get what your saying but im still a bit confused, as in, if they say the average interest of the bailout is 5.8% of 85 billion , THEN I see what you mean, THEN we are defo paying >7%,
but Im not sure if they said its 5.8% of 85 billion or 5.8% of the money we borrow.

Its on whatever we borrow. In theory, if the 4 year plan works, we may not need to borrow ant of this 85BN fund.

hmmm wrote: »

Michael Noonan had a superb initial analysis on this. Because we will drawdown the money with the least interest charges first, there is an incentive for Ireland not to draw down the whole amount. If we manage to pull off the budget and get our deficit on a sustainable path, there is every chance we can go to the market for a lower interest rate and avoid having to draw down later tranches of the money.

Cardiff from the DOF alluded to this at the press conference when he said we were not excluded from raising funds from the market, in particular he said the option of raising short term money was available. You could quite quickly see Ireland be able to borrow at rates approaching 4/5% for short term maturities.

Exactly. Its not a bed deal at all.

SkepticOne

hmmm wrote: »

Michael Noonan had a superb initial analysis on this. Because we will drawdown the money with the least interest charges first, there is an incentive for Ireland not to draw down the whole amount. If we manage to pull off the budget and get our deficit on a sustainable path, there is every chance we can go to the market for a lower interest rate and avoid having to draw down later tranches of the money.

Why offer it then? The best means of disincentive someone from borrowing is not to offer the loan in the first place.

The only reason that makes sense is that this is not being done for our benefit. It is being done for the purposes of buying time by allowing Ireland to get further into debt rather than provoking a crisis now.

zig

flynnlives wrote: »

85billion at 5.8% FF doublespeak = 4.93billion per year

now when you factor in that we are offering the NPRF at 0%, our own money it becomes the following:
85-17.5=67.5billion ie the true amount being borrowed!

So its in fact 67.5billion @ 7.3%

I think we've already established that this is not the case.

zig

newmug wrote: »

Its on whatever we borrow. In theory, if the 4 year plan works, we may not need to borrow ant of this 85BN fund.




Exactly. Its not a bed deal at all.

Its not a bad deal at all if it works.
Lets roll the dice and see.

newmug

SkepticOne wrote: »

Why offer it then? The best means of disincentive someone from borrowing is not to offer the loan in the first place.

The only reason that makes sense is that this is not being done for our benefit. It is being done for the purposes of buying time by allowing Ireland to get further into debt rather than provoking a crisis now.

You're right, its not DIRECTLY for our benefit. Its because the Euro currency has become unstable, and they need a band-aid to patch things up. We may not need a penny of any of this. It will help stabilise the Euro. And if international markets calm down because of all this, it'll also benefit us by bond interest rates coming down.

flynnlives

SkepticOne wrote: »

The only reason that makes sense is that this is not being done for our benefit. It is being done for the purposes of buying time by allowing Ireland to get further into debt rather than provoking a crisis now.

Nail. Head.

Its a nice little trap!
We have effectively given away any leverage we had left, ie if we needed to leave the euro we could have used the nprf to start up the presses again.
Now we cant.

We are completely at the mercy of Europe now!

This deal couldnt have been more worse!

flynnlives

zig wrote: »

I think we've already established that this is not the case.

were?

zig

flynnlives wrote: »

were?

well my only source for this particular issue is here and Politics.ie and i think we only pay that interest rate on the money we draw down, meaning 5.8% of whatever money is taken out. The pension fund will have nothing to do with the money we take out. Im still open to correction on this.