Ireland to Borrow at 5.8%

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.

newmug

zig wrote: »

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

Its all we can do anyway. At least now we have the guaranteed backing of 85BN should the 4 year plan go pear shaped.

flynnlives

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.

What are you on about?

Of course we are going to be using the bailout!!!
Seems like you have little understanding of this!!

50Billion is going on the deficit and funding of the state for the next 5 years.

35billion is going to the banks, 10 billion immediately.
The rest will follow quickly using all our NPRF along the way.

This will still not be enough!!

We still have the massive train wreck coming down the line in mortgage losses!!
No were in this takes that into account!!

All this deal does is drag out an inevitable default by 2/3 years.

Watch tomorrow how the markets react, especially Portugal, imo they wont buy it.

newmug

flynnlives wrote: »

What are you on about?

35billion is going to the banks, 10 billion immediately.
The rest will follow quickly using all our NPRF along the way.

This will still not be enough!!

We still have the massive train wreck coming down the line in mortgage losses!!
No were in this takes that into account!!

All this deal does is drag out an inevitable default by 2/3 years.

Watch tomorrow how the markets react, especially Portugal, imo they wont buy it.

What are YOU on about? Part of the deal is that banks have to be reformed. The 10BN will prob from the NPRF, so 0% interest. I have a sneaky suspicion that the reason 85BN was the figure agreed upon is that that is the collective value of mortgages in Ireland, so they're taking a default into account, IF it happens. Why do you think its inevitable, and if it is, why hasn't it happened already?

EDIT: Sneaky bit of editing there flynn. Where did it say 50BN is being used to run the country? The 4 year plan is supposed to have that covered. And no need for insults about "understanding". You're not an economist.

zig

newmug wrote: »

Why do you think its inevitable, and if it is, why hasn't it happened already?

Because the ECB were giving us money, and the bond market interest rates werent as high as they are now.

newmug wrote: »

Where did it say 50BN is being used to run the country? The 4 year plan is supposed to have that covered

It was said in the press conference today.

SkepticOne

newmug wrote: »

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.

Most likely we will dig into the package and although I think the bond rates will come down, they will only come down to roughly match the bailout rate but no lower since our only bargaining power against them will be the option to draw the money down from the bailout package.

Here's why I think this is the case. At these rates according to the likes of Morgan Kelly, we'll still end up defaulting down the line as our economy will not be able to produce enough to pay the interest rate. And there's no guarantee that 85 billion is all we'll need. If the economy shrinks we may need more. All these possibilities will be taken into account by the bond markets.

Blowfish

newmug wrote: »

EDIT: Sneaky bit of editing there flynn. Where did it say 50BN is being used to run the country? The 4 year plan is supposed to have that covered.

The money to cover the cost of the deficit during the 4 years has to come from somewhere, which is what the 50bn is for.

TheGodBen

newmug wrote: »

EDIT: Sneaky bit of editing there flynn. Where did it say 50BN is being used to run the country? The 4 year plan is supposed to have that covered. And no need for insults about "understanding". You're not an economist.

Even at the end of the 4-year plan, there's still going to be a budget deficit of 3%, where do you think all that money is going to come from? It was specifically stated at the various press conferences that the 50 billion was to fund the state over the course of the next four years. Theoretically, if the interest on Irish bonds comes down we could borrow from there instead, but that doesn't seem likely to happen, not with this plan. We'll have to see how the markets react to this, but I'm not hopeful.

kaiser sauze

newmug wrote: »

What are YOU on about? Part of the deal is that banks have to be reformed. The 10BN will prob from the NPRF, so 0% interest. I have a sneaky suspicion that the reason 85BN was the figure agreed upon is that that is the collective value of mortgages in Ireland, so they're taking a default into account, IF it happens. Why do you think its inevitable, and if it is, why hasn't it happened already?

EDIT: Sneaky bit of editing there flynn. Where did it say 50BN is being used to run the country? The 4 year plan is supposed to have that covered. And no need for insults about "understanding". You're not an economist.

The €50Bn IS being used to fund our exchequer deficits.

You still think the remainder will cover the forthcoming mortgage defaults?

In case you are unaware of what I am talking about, there is a directive in this deal that the banks repay, quickly, what liquidity the ECB/Central Bank have pumped into them. I think the term is 'deleverage'. This money has to come from somewhere. Where do you think it will come from? Yes, you are right, higher home-loan rates.

kaiser sauze

TheGodBen wrote: »

Even at the end of the 4-year plan, there's still going to be a budget deficit of 3%, where do you think all that money is going to come from? It was specifically stated at the various press conferences that the 50 billion was to fund the state over the course of the next four years. Theoretically, if the interest on Irish bonds comes down we could borrow from there instead, but that doesn't seem likely to happen, not with this plan. We'll have to see how the markets react to this, but I'm not hopeful.

We have now got until 2015 for the 3% target.

Leiva

5.8% ... It may as well be 50% cause we have no chance of servicing this debt .

This is a diversion tactic and another step in the on-going saga .

The markets won't fall for this .
It is not the end of the matter .

The markets now have Portugal in their cross hairs.
Then Spain.
Ireland is yesterdays news .

This deal won't be worth the paper it's written on within 18months.

The Eurozone is in major crisis , little oul Ireland getting a €85billion plaster ain't gonna stop the hemorrhaging .

M