Ireland Goes Bust

[Jan Klimkowski]

From Zero Hedge and Irish media sources:

Not All PIIGS Are Created Equal:
Irish Bail Out Package To Come With 6.7% Interest Tag, 1.5% Higher Than Greece

Submitted by Tyler Durden on 11/26/2010 18:39 -0500

RTE reports that the IMF/EU Irish rescue package will come with a whopping 6.7% rate for nine year money. Per the RTE article, it is unclear if that will be an APR or some multi-year blended effective annual yield: "The Government's four year plan assumes that by 2014, interest payments will have increased from €2.5 billion to €8.4 billion a year - around one fifth of all tax revenue." Regardles of how it is calculated, newspaper tomorrow will be blasting the 6.7% number, which is 150 bps wide of what Greece is paying on backstopped paper, and will only create further resentment at the fact that not only is Europe split into a core and PIIGS, but that it is now apparent that not all PIIGS are treated as equals. How Irish citizens will react once they find out that the EU believes they are less creditworthy than even the Greeks, only the IRA can predict.

From RTE:

It is understood that the Taoiseach, the Minister for Finance, the heads of the Central Bank, the NTMA and senior officials met in Government Buildings for several hours this evening to discuss the details of negotiations with the EU and the IMF.

It is believed that contacts will resume tomorrow.

Fine Gael Finance Spokesman Michael Noonan said the suggestion of a 6.7% rate was very disturbing.

He said the Government must not abandon the national interest and settle on unaffordable terms in its negotiations.

Earlier, leaders of the Irish Congress of Trade Unions finished discussions on the country's debt crisis with the EU/IMF delegation in Dublin.

And also in the RTE we read of a guaranteed harbinger of what is to come for the ruling party, a Sinn Fein representative won a by-election in Donegal: the same opposition party which has branded the current administration in Ireland as traitors.

Pearse Doherty has been elected in the Donegal South West by-election to fill the Dáil seat vacated by MEP Pat The Cope Gallagher.

He was elected after the fourth count without reaching the quota. Fine Gael's Brian O'Neill came second with Fianna Fáil's Brian Ó'Domhall in third place. The total valid poll was 34,424 and the quota is 17,213.

Mr Doherty got the highest number of first preference votes with 13,719 in the first count.

He described the election as, 'the by-election the Government never wanted to happen' adding that 'the result tells us why'.

Speaking after the result was announced, Mr Doherty said the vote was a rejection of the interference of the IMF in Irish affairs and said he would be voting against the Budget on 7 December.

Update: Irish Times is quick to quell the public fury by reporting that while it has no clue what the interest rate will be, a "source" has said it will be lower than the 6.7%. In other words, just like the Greek bailout package started at $500 billion early in the day on that fateful Sunday in May only to progress to $1 trillion based on the futures reaction, so the IMF now will likely determine just what the final interest rate on the rescue loan will be based on the degree of public mauling of various elected officials over the weekend. Mere cuts and lacerations should be sufficient for 6%, broken bones: 5.75%, 3rd degree concussions: 5.5%, getting someone drawn and quartered may just leave Ireland to borrow on the same terms as 3 month US T-Bills.

The interest rate for a nine-year EU/IMF loan would be lower than the 6.7 per cent being quoted in some reports today, a source involved in the talks has indicated.

The source said the interest rate was still under negotiation but would not be that high.

The loan of €85 billion would come from a number of different funds, some controlled by European Union institutions, others by the IMF. It is understood that the interest rate for the IMF portion of the loan will be in the region of 4.5 per cent, while the interest charged by EU bodies will be considerably higher.

The source accepted that the average interest rate was likely to be higher than the 5.2 per cent charged to Greece when it was bailed out earlier this year. But it was pointed out that the Greek loan was for a period of only three years.

Higher rates of interest are attached to longer loans and the nine-year loan being negotiated on behalf of the State will involve a higher interest rate, as the risk of default is considered to be higher.

Officials in the EU-IMF mission to Dublin are examining how senior bondholders could be compelled to pay some of the cost of rescuing Ireland’s banks.

http://www.zerohedge.com/article/not-all...her-greece