Bailout Interest Rate Negotiations

roosh

I'm just wondering if anyone has any idea what the story with this is?

Has it gone to a vote, or what has happened thus far?

Scofflaw

mangaroosh wrote: »

I'm just wondering if anyone has any idea what the story with this is?

Has it gone to a vote, or what has happened thus far?

No, it hasn't gone to a vote, but the French are supposed to have dug their heels in, and will veto any changes in the EFSF or (presumably) EFSM. The IMF, the Commission, the OECD, and 25 of the 27 member states are on board with a reduction in the EFSM rate, but unfortunately it's neither up to the Commission nor a matter for weighted voting - it's a unanimity issue. As far as a reduction in the EFSF rate goes, the problem is that the two opposed states - Germany and France - are also EFSF members, and EFSF, being a purely multilateral and non-EU fund, is also unanimity-based, so the Franco-German veto applies there too.

The government is using climb-down language recently, suggesting the amount that could be saved is too small to make it worthwhile. They originally claimed a reduction of 1% might save us €450m a year, but are now saying it would save us only €150m a year.

Not sure what either of those figures are supposed to be based on, mind you, given we're not expecting to use the whole bailout package, and we're providing some of it ourselves - and we haven't yet drawn down the full package, so it's not clear whether they're referring to the interest on the whole package, or the interest on what we've drawn down.

As far as I know, though, the government haven't given up on getting a reduction, which is as it should be - we'll be paying interest for quite a while, so a reduction at any point would be fine.

cordially,
Scofflaw

beeftotheheels

Scofflaw wrote: »

The government is using climb-down language recently, suggesting the amount that could be saved is too small to make it worthwhile. They originally claimed a reduction of 1% might save us €450m a year, but are now saying it would save us only €150m a year.

Not sure what either of those figures are supposed to be based on

http://www.irishtimes.com/newspaper/frontpage/2011/0609/1224298641790.html

Taoiseach Enda Kenny yesterday said the maximum savings the Government could achieve from an interest rate cut were €150 million per annum, compared to €400 million if the rate on the whole loan was cut from 5.8 per cent to 4.8 per cent.

Mr Kenny, speaking in the Dáil, based the reduced figure on the fact the interest rate reduction would not apply to the €15 billion in European loans already drawn down, and only to the €24.6 billion remaining.

Minister of State at the Department of Finance Brian Hayes also confirmed the Government was looking for a 0.6 per cent reduction during the negotiations with the EU and the European Central Bank.

roosh

cheers guys

careca11

Scofflaw wrote: »

No, it hasn't gone to a vote, but the French are supposed to have dug their heels in, and will veto any changes in the EFSF or (presumably) EFSM. The IMF, the Commission, the OECD, and 25 of the 27 member states are on board with a reduction in the EFSM rate, but unfortunately it's neither up to the Commission nor a matter for weighted voting - it's a unanimity issue. As far as a reduction in the EFSF rate goes, the problem is that the two opposed states - Germany and France - are also EFSF members, and EFSF, being a purely multilateral and non-EU fund, is also unanimity-based, so the Franco-German veto applies there too.

The government is using climb-down language recently, suggesting the amount that could be saved is too small to make it worthwhile. They originally claimed a reduction of 1% might save us €450m a year, but are now saying it would save us only €150m a year.

Not sure what either of those figures are supposed to be based on, mind you, given we're not expecting to use the whole bailout package, and we're providing some of it ourselves - and we haven't yet drawn down the full package, so it's not clear whether they're referring to the interest on the whole package, or the interest on what we've drawn down.

As far as I know, though, the government haven't given up on getting a reduction, which is as it should be - we'll be paying interest for quite a while, so a reduction at any point would be fine.

cordially,
Scofflaw

if we don't get the reduction , then we should bang on ahead and reduce our Corporation tax by 1 or 2 % ...........................let sharkozy stick that in his pipe and smoke it

Scofflaw

careca11 wrote: »

if we don't get the reduction , then we should bang on ahead and reduce our Corporation tax by 1 or 2 % ...........................let sharkozy stick that in his pipe and smoke it

In a sense, though, that just shows we're susceptible to outside pressure - and it would also be unsustainable in the current situation. While I'm OK with a low CT rate, there's no real argument for lowering it.

Unfortunately, though, Sarkozy doesn't need us to actually change the rate to benefit from the game he's playing - it's sufficient that he's causing concern over whether we might change it, which is why the government have had to say that it's really not negotiable.

cordially,
Scofflaw