# Details: Joint EU - IMF Programme for Ireland



## Duke of Marmalade (28 Nov 2010)

5.8%;  seems a gimme after the scares


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## Marion (28 Nov 2010)

Details of the programme

Marion


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## Expat64 (28 Nov 2010)

18B of that is our own money - from the NPRF. So the interest rate on the rest I think is about 7%. Can anyone calculate it exactly?


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## DerKaiser (28 Nov 2010)

Duke of Marmalade said:


> 5.8%;  seems a gimme after the scares



It represents something like a 25% chance of default over the term of the loans.

Hopefully we can get back into the bond markets within a few years to get off this life support.  

If not, it's likely we will be looking at some kind of default as it would signal things are not going well.


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## feltox (28 Nov 2010)

Just wondering why they are calling it a 85billion bailout when in effect only 67.5billion is coming from these external funds

would it not be more clear to tell world package is lower at 67.5b

if 85 billion- should we not get 85billion from these external funds and not use interrnal funds

like going to a bank for a mortgage of 85 billion and be given less than we asked for

maybe i missed the bigger picture

the eu negiotation team must be laughting at us now that they got us to spend our last wall of defence money first

why accept money from uk, sweeden and demark

Brian cowen should be totally ashamed of where this country is now at tonight

i read in paper over week it is alledged that between 2004-2008 he met financial regulator only two times- that saids a lot


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## bluemac (28 Nov 2010)

its all smoke and mirrors.....  the real answer will be in the morning form the bond markets... fingers crossed


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## Duke of Marmalade (28 Nov 2010)

Expat64 said:


> 18B of that is our own money - from the NPRF. So the interest rate on the rest I think is about 7%. Can anyone calculate it exactly?


That is an interesting point but surely it is not that crude a ruse.  Kevin Cardiff went on about how the NPRF currently only earn 1% on their cash and that in fact the 5.8% should be mitigated by these considerations.  I would love to see the details of these calcs.


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## Brendan Burgess (28 Nov 2010)

I am missing something here. 

They have made a fund of €50m available to us at 5.8% to fund the  exchequer deficit. If they had not done so, we would have to borrow it on the bond markets at around 9%.  And this is to pay for social welfare, old age pensions and the health service.

Many of us have taken our money out of the Irish banks, so they have made a further €35b available to replace this money.

All we have had to do, was to contribute €17.5b of money we had elsewhere. 

Why do people think that this is a bad deal?  Do they want us to default  on paying salaries to public servants, social welfare and old age  pensions?


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## feltox (28 Nov 2010)

Why them are they calling it a 85Billion bailout when in effect it is 67.5

Would it not be bettter tell the world it as 67.5 and lower than 85 that everyone is talking about

Brian cowen did not want to tell the interest rates on different drawndowns-what the secret. 



even put in on press release


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## DerKaiser (28 Nov 2010)

Brendan Burgess said:


> Why do people think that this is a bad deal?



Because Greece appear to have got a cheaper rate and the funds from the EU seem to be at a higher rate than the IMF.

Also we're committing to borrow a lot of money to make sure the banks are well capitalised.  This is very expensive capital.  

I don't think people are convinced of the worth a well capitalised Irish owned banking system if the interest bill is hitting us to the tune of a few billion.  Is it worth taking the risk on non-irish owned banks playing a bigger role in the Irish economy?


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## Marion (28 Nov 2010)

Some interesting detail here in relation to interest rates .

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/11/what_the_uk_is_contributing_to.html

Marion


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## television (28 Nov 2010)

Brendan Burgess said:


> I am missing something here.
> 
> They have made a fund of €50m available to us at 5.8% to fund the exchequer deficit. If they had not done so, we would have to borrow it on the bond markets at around 9%. And this is to pay for social welfare, old age pensions and the health service.
> 
> ...


 
Most independant economists seem to think its a terrible deal.  Constantin Gurdgiev, Mc Williams etc.  Joan Burton hit the nail on the head when she argued about why we have to use up our own reserves first.  

I am no economist but it seems the Germans lend money to our banks wrecklessly and the ordinary tax payer of ireland is paying for *all of it.  And now we the ordinary tax payer and probably my kids are going to be saddled with enormous debt for generations and you think its a good deal? If we did not have this bank debt this crisis would be managable.  *

*Thanks a bunch our European Partners.*


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## partnership (28 Nov 2010)

The interest rate being 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.

So much for our so called friends in the EU - we should have got the full amount off the IMF.


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## television (28 Nov 2010)

http://krugman.blogs.nytimes.com/


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## Brendan Burgess (28 Nov 2010)

> I am no economist but it seems the Germans lend money to our banks  wrecklessly and the ordinary tax payer of ireland is paying for *all of it.*



It's much more complicated that that. 

€50billion of this money is to finance the exchequer deficit because the government is spending more than the tax income. 

It was not just the Germans who lent us the money. It was also the Irish depositors and Irish institutions who deposited money in our banks, "recklessly" as you put it.

Brendan


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## television (28 Nov 2010)

Brendan Burgess said:


> It's much more complicated that that.
> Brendan


 
Is it really though?




Brendan Burgess said:


> €50billion of this money is to finance the exchequer deficit because the government is spending more than the tax income.



And the root of this taxation imbalance can be traced back to an over reliance on stamp duty brought about by a housing boom caused by low EU interest rates not suitable for the irish economy. Did not stop the germans pumping in the money though.  But when the storm hits who takes the pain?


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## Purple (29 Nov 2010)

Brendan Burgess said:


> €50billion of this money is to finance the exchequer deficit because the government is spending more than the tax income.


Use our reserve fund to cover this, along with tax increases and reductions in public spending. It would be far cheaper in the medium term. The idea that nurses and teachers would suddenly stop getting paid is spurious.   



Brendan Burgess said:


> It was not just the Germans who lent us the money. It was also the Irish depositors and Irish institutions who deposited money in our banks, "recklessly" as you put it.


There’s a big difference between depositors who put their money into a bank for safe keeping and people/companies who bought bonds as an investment. The higher rates of interest than was paid to them than the depositors is indicative of the implied risk that they were taking.


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## DerKaiser (29 Nov 2010)

I'm fast coming to the same conclusion. 

We have cash on deposit and the NPRF to see us through a few more budget deficts.

I'm not sure the cost-benefit analysis of the state pumping money into the banks is assessed in any meaningful way. Do we have a point at which we just cut our losses? 

Surely everyone has to believe that there is some cost at which the citizens of this state would be better off going through the turmoil of a default and coming out the other side significantly less indebted.  It may not have been €5bn or even €20bn, but could it be €50bn? Surely it would be less than €100bn?

We know at this stage that we will be pumping something like €50-€70bn into the banks. Can someone point out in objective monetary terms a costlier alternative? I challenge the people who believe the bank bailout by the state is the correct course of action to come up with the figure at which the cost would have been prohibitive.


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## Birroc (30 Nov 2010)

Why haven't the IMF come in and slashed and burned like everyone feared they would?


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## Shawady (30 Nov 2010)

I was thinking this too.
My opinion is that the EU-IMF do not want themselves to be seen as being too heavy handed initially. Maybe they think it will be accepted easier if people think that they have not lost their sovereignty.
I think they are happy enough to allow the government to present the 4-year plan as their document, but if targets are not being met at the quarterly reviews I expect the IMF to turn the heat up. Items like old age pensions, CPA and maybe even 12.5% corporation tax rate may come back on the agenda.


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## dockingtrade (30 Nov 2010)

the 5.8% will force the govt to eventually do the slash and burn.


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## Brendan Burgess (30 Nov 2010)

DerKaiser said:


> We know at this stage that we will be pumping something like €50-€70bn into the banks. Can someone point out in objective monetary terms a costlier alternative? I challenge the people who believe the bank bailout by the state is the correct course of action to come up with the figure at which the cost would have been prohibitive.



Der Kaiser

Most of the money has already been pumped into the banks.

 The additional money at the weekend was for recapitlization and funding rather than to pay for the losses. 

€50 billion of the facility is for day to day spending such as the health service, social welfare and pensions. 

Brendan


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## DerKaiser (30 Nov 2010)

Brendan Burgess said:


> Der Kaiser
> 
> Most of the money has already been pumped into the banks.
> 
> ...


 
Yep I know we've put something like €35bn into the banks to date to cover losses. As you point out, once the money is in it's in, so we'd be very unlikley to ever see what we've put in already. 

We are at a point though where the money to boost the capital ratio to 12% (€10bn) and the additional contingency capital (€25bn) has not yet been committed (as far as I know). 

I would love to see the logic behind any confidence that these so called 'capitalisation' measures do not simply succumb to further losses.

Are we happy to throw this additional €35bn into the black hole? 

And if this proves insufficent (perhaps this will occur when we have mass mortgage defaults as interest rates rise, unemployment rises and disposable incomes plummet), do we stop at €70bn?

Then there's the additional €50bn in budget deficits to run the state in the next number of years. 

I think the part of the €50bn not relating to debt interest on bank bailout money obviously needs to be paid by the state as there is a very clear link that we are spending it on ourselves collectively as a state. 

All we can do here is try cut the budget deficits as quick as we can and avoid saddling ourselves with an outrageous level of debt interest from borrowing to cover bank losses.


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## cremeegg (30 Nov 2010)

Brendan Burgess said:


> I am missing something here.
> 
> They have made a fund of €50m available to us at 5.8% to fund the  exchequer deficit. If they had not done so, we would have to borrow it on the bond markets at around 9%.  And this is to pay for social welfare, old age pensions and the health service.
> 
> ...



Yes Brendan, I do think you are missing something. I don't want the govt to borrow a further €85bn. It seems madness to me. 

And yes I do have a better idea. Don't borrow €85bn and live on the €30bn income the govt has. 

We are borrowing money that will have to be repaid in future years to fund todays standard of living. Thats madness.

Other countries have done borrowed like this in the past with some success, because future nominal growth (including real and inflation elements) reduced the debt burden. Indeed this eased Ireland's problems in the 1980s. I don't think that this escape route will be open in the coming years. The period of continuous growth the western world has enjoyed since WW11 may be coming to an end. This because of adverse demographics and the rise of other economies. 

For Ireland to take on huge new borrowings now is madness. I don't want to default on public sector salaries etc. I just want to cut them to a level we can afford.


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## Purple (1 Dec 2010)

The "we can't stop now or we'll lose what we've put in" is like a gambler at the table upping the stakes in order to chase his losses.
Just like a gambler we can’t keep going forever as eventually we’ll hit the house limit.


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## Firefly (1 Dec 2010)

Purple said:


> The "we can't stop now or we'll lose what we've put in" is like a gambler at the table upping the stakes in order to chase his losses.
> Just like a gambler we can’t keep going forever as eventually we’ll hit the house limit.



It's the political fallout that IMO is driving this mentality...FF being remembered as losing xxbillion forever...a lot worse than those e-voting machines. The correct way (as hard as it is) is threat the money already spent as spent and non-recoverable...ie a sunk cost 
http://en.wikipedia.org/wiki/Sunk_costs


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