# Bailouts Are Loans?



## roker (6 Sep 2011)

I keep reading in the newspaper about bailouts and one thing puzzles me. Could someone please explain how are the taxpayer of Germany and France etc. being penalised, they are not giving us money they are lending us money and profiting in the process


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## Brendan Burgess (7 Sep 2011)

They are lending us money at a rate much cheaper than anyone else would give us.

We are a sub-prime lender who can't get loans anywhere else.

The ECB is lending to the Irish banks at 1.5%.

The troika is also at a much reduced rate. 

Don't forget that many people are calling for us to default on our loans.

And many more believe that we will probably default eventually.


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## JoeB (7 Sep 2011)

I think we'll owe about 250 billion by 2014.

Paying that off over 20 years would require capital re-payments of approx 12 billion per year. Interest in the first few years, if at only 2%, would be another 5 billion.

So 17 billion to pay each year, on interest and capital.

We currently take in 50 billion I think, and spend 70 billion. I cannot see us getting our spending down to 33 billion, from 70 billion, .. so that we can spend our 50 billion per year on 33 spending and 17 interest and capital.


Are these back of the envelope calculations significantly wrong? If not I think we're deluding ourselves if we think we can pay it all back.


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## roker (7 Sep 2011)

Sorry when it comes to economics I am useless, other than keeping my own house in order ( no loans etc)


How is the ECB lending at 1.5%
Were we not negotiating a reduced rate around 6%


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## Jim2007 (7 Sep 2011)

roker said:


> I keep reading in the newspaper about bailouts and one thing puzzles me. Could someone please explain how are the taxpayer of Germany and France etc. being penalised, they are not giving us money they are lending us money and profiting in the process



They are actually being hit in a couple of different ways - To lend the money, the German government will have to take it out of their budget, so service levels will have to fall or taxes will have to rise - most likely a bit of both, same as what happened when they merged with East Germany.

But that is not all, their pension saving have fallen a lot as well, because under German law, pension funds are required to hold a certain percentage of their savings in AAA Euro bonds, and I'm sure you can guess which bonds many of them were holding.

Be in no doubt that German taxpayers are paying a price for this, as are may other European tax payers as well.    

Jim (Switzerland)


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## onq (7 Sep 2011)

The basic maths looks significantly right, but we live in a world where the budget of one country for just one department annually dwarfs our total debt (America - Defense - 1.4Trillion Dollars approx) so I live in hope.

On the other hand I came across a recent link that suggests Germany may not be as happy as it once was to be Europes economic leader.

http://www.businessinsider.com/josef-ackermann-euro-banks-speech-frankfurt-2011-9


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## onq (12 Sep 2011)

Brendan Burgess said:


> We are a sub-prime lender who can't get loans anywhere else.



Hi Brendan,

Did you mean to post

"We are a sub-prime _borrower_ who can't get loans anywhere else?"

Otherwise I'm not sure I follow.


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