Lower interest rates

MagicSean

If Irelands interest rate is lowered from 5.5% to 4% and the time to repay is doubled I presume we will be spending a lot less on interest and repayments per year and hence reducing our budget deficit. Does anyone know what that change will be? How much will this new deal save us per year?

kippy

Seanbeag1 wrote: »

If Irelands interest rate is lowered from 5.5% to 4% and the time to repay is doubled I presume we will be spending a lot less on interest and repayments per year and hence reducing our budget deficit. Does anyone know what that change will be? How much will this new deal save us per year?

We will be spending a lot more on interest in that scenario (I believe) over the whole term of the loan. (Basing that on my knowledge of mortgages and I think it's a similiar system just with much higher figures)
It won't have much to do with our budget deficit (again based on my own understanding) That will still have to be reduced by cutting expenditure and increasing revenue.

A 1% interest rate cut is going to be almost insignificent in the whole scheme of things. The whole thing is a pointless exercise (interest rate cut) in the present circumstances in my opinion and the time could be spent better elsewhere.

beeftotheheels

Seanbeag1 wrote: »

If Irelands interest rate is lowered from 5.5% to 4% and the time to repay is doubled I presume we will be spending a lot less on interest and repayments per year and hence reducing our budget deficit. Does anyone know what that change will be? How much will this new deal save us per year?

Well, there are a few elements to this.

1. A government, like a company, reports its profits/ losses both before and after interest, and this before interest number is the one that most people pay attention to in determining whether the country is sound. This is called a primary deficit/ surplus (deficit in our case) so the interest rate won't impact on that, and we still need to fix it.

2. The interest rate will impact on how much cash interest we have to pay, and on the size of our actual deficit, so reducing it saves us cash.

3. We'd be unlikely to ever pay off the loans the way a person would, we'd roll them over by borrowing money off peter (the markets) to pay Paul (the EFSF). So extending the maturity doesn't reduce actual repayments (which we'd never make anway), but it gives us certainty as to our funding position for a longer period of time and thus reduces our need to go back to the markets.

In terms of how much we save, not an idea until we see the actual numbers and structure of the deal, and I wouldn't necessarily assume that we'll get the same deal as Greece.

Greece is bleeding out its ears so they get to saunter into the A&E and, no waiting, get rushed off to surgery. We're sitting around the A&E with our broken arm waiting to be seen. It is not pleasant but you can kinda see why it is happening, and it is (hopefully) unlikely that our broken arm will require surgery so we might just get a plaster cast. There is of course the risk we'll pick up a flesh eating infection in the hospital in which case we will need surgery, (indeed we've certainly picked up something so an overview of A&E cleanliness is certainly required, the summit has to deliver this) but I think it is just possible at the moment that we can keep ticking along.

If we got an interest rate reduction above and beyond what we actually needed, imagine how poor Spain and Italy would feel.

Tora Bora

Holy moley, lads we are on a serious roll here, what with the interest rate reduction, (I presume Baldy Noonan is wiping Sarkozy's blood off his gloves as we speak) longer time to pay back the bail out money, and Mr Corrigan up at the NTMA, coming out of his corner, like Cassius Clay in his heyday:cool:

"We have now turned the corner"

http://www.irishtimes.com/newspaper/breaking/2011/0721/breaking28.html

Ireland may test market in 2012

Related

• New bailout loans to Greece to be offered at 3.5% - report | 21/07/2011

External

• NTMA

The Irish Times takes no responsibility for the content
or availability of other websites


Ireland does not need nor want private investors to swallow losses on Irish debt and may seek to put its "toe" back in the debt markets in the second half of 2012 with a sale of treasury bills, the head of the country's debt management agency said.
"Ireland doesn't need and is not suggesting that there be any private sector involvement in the Irish solution," John Corrigan, the chief executive of the National Treasury Management Agency (NTMA), said.

"Any such involvement, would be an extremely risky path to go down.

"Any such suggestion would result in a permanent elevation in our borrowing costs," Mr Corrigan said.
US investors including hedge funds will probably be the first buyers as Ireland seeks to return to bond markets after a roadshow by the agency this year generated "huge interest", according to Mr Corrigan.

Ireland sought an international bailout last year as investors shunned government and bank debt after the economy shrank about 15 per cent since 2007. While the NTMA said the state is fully funded through 2013, the Government has said it wants to test the market next year.

"International investors acknowledge the strong progress Ireland is making in tackling its domestic problems, but the stresses in the euro zone overshadow everything else," Mr Corrigan said at a briefing today in Dublin.

The yield on 10-year Irish bonds has climbed to 12.424 per cent since November 26th, two days before the European Union and the International Monetary Fund signed off on the coutry's €85 billion bailout.

European leaders arrived in Brussels seeking solutions for the 21-month-old sovereign-debt crisis as Luxembourg Prime Minister Jean-Claude Juncker said Greece may not be able to avoid a default.
Speculation has risen that Ireland will need a second bailout when its existing €85 billion rescue package from the EU and the IMF runs out in 2013, but Mr Corrigan remains confident Dublin will be able to meet its funding needs from the markets.

The NTMA is planning to issue treasury bills in the third quarter of 2012 before issuing bonds, likely in 2013.
Reuters

Sir Oxman

It sounds like another massive kick the can down the road whilst ignoring the ever present elephant in the room (that the State cannot afford to pay back private bank debts without crippling the economy)

It's still the same amount of money being paid back by the people who didn't incur the debts and will end up probably costing more.

And I feel this lower interest rate is nothing to do with FG/Lab but rather Italy and Greece.

Sierra Oscar

We are ignoring the fact that we will not be able to repay the loan as it is. This is all a sideshow.

kippy

Sierra Oscar wrote: »

We are ignoring the fact that we will not be able to repay the loan as it is. This is all a sideshow.

Nah, I wasn't really ignoring that - just not pointing it out.
The poloticos appear to he happen enough to keep kicking the can down the road for future generations to sort out.

hmmm

Tora Bora wrote: »

"Any such suggestion would result in a permanent elevation in our borrowing costs," Mr Corrigan said.

A very very important point from the NTMA, which is conveniently ignored by those advocating short-termist thinking such as a default. Short term thinking has gotten us into this mess in the first place.

kippy

Looks like the percentage cut is 2%.
One has to ask why would Italy and Spain continue to borrow on the markets at 6% if the rates from the bailout funds are as low as four (apart from that whole sovereignty question )
I assume though that the EU are hoping that this deal will reduce the markets rates for lending to Spain and Italy and that is the logic in it?
http://www.irishtimes.com/newspaper/breaking/2011/0721/breaking6.html

MagicSean

kippy wrote: »

Looks like the percentage cut is 2%.
One has to ask why would Italy and Spain continue to borrow on the markets at 6% if the rates from the bailout funds are as low as four (apart from that whole sovereignty question )
I assume though that the EU are hoping that this deal will reduce the markets rates for lending to Spain and Italy and that is the logic in it?
http://www.irishtimes.com/newspaper/breaking/2011/0721/breaking6.html

Well the bail out rate has just been reduced so they could change their mind.

According to RTE it will save the country 600m+ per year.

kippy

Seanbeag1 wrote: »

Well the bail out rate has just been reduced so they could change their mind.

According to RTE it will save the country 600m+ per year.

I would have thought that extending the term would completely wipe out the savings (in the longer term) - it would in fact increase the total interest over the whole term.
Would this be a correct assumption to make?

View

It should be pointed the "Bailout" is a loan facility and that the majority of it - 50 Billion - is there to cover our current account spending (i.e. day-to-day government spending) while we sort out our budget finances. We are not obliged to borrow this. If we want to make deeper cuts in our day-to-day spending to reduce our potential borrowings, we are free to do so.

The other EU leaders are not going to ring Enda up and insist we borrow money from them in order to keep Roscommon A&E open for instance. The locals in Roscommon might like them to but they won't.

PhatPiggins

kippy wrote: »

I would have thought that extending the term would completely wipe out the savings (in the longer term) - it would in fact increase the total interest over the whole term.
Would this be a correct assumption to make?

Only if the interest repayment are annualised i.e 4% per year over 15 years. Is it 4% of the total amount borrowed regardless of the time period its paid over?

I'm just guessing so please correct me if I'm wrong

beeftotheheels

kippy wrote: »

I would have thought that extending the term would completely wipe out the savings (in the longer term) - it would in fact increase the total interest over the whole term.
Would this be a correct assumption to make?

Sovereigns generally don't repay debt, they roll it over i.e. borrow off peter to repay paul.

So, chances are that once we have national debt of e.g. 100m we will always have national debt of at least 100m. But just as with the person who is making the final payment tomorrow on their 1986 €25k mortgage, what seems like a big number today is not necessarily a big number years later once inflation and growth have eroded the real value of the debt.

So, lengthening the term of the debt would result in additional interest if we ever planned on repaying the debt. But being a sovereign we probably do not, which means that lengthening the term of the debt while reducing the interest rate is a good thing for us.

If it ever gets to the stage that we can get a better rate from the markets than we can get from the EFSF we would be absolutely free to borrow off the markets and use those funds to repay the EFSF debt.

And as View pointed out, we don't actually have to borrow all of the money available to us, just as I don't have to operate with my current account at the limit of my overdraft. Having an overdraft facility doesn't mean my account ever actually has to go over drawn.

Scofflaw

Sierra Oscar wrote: »

We are ignoring the fact that we will not be able to repay the loan as it is. This is all a sideshow.

We've never repaid anything we've borrowed - that's not how it works with national debts.

Only if the interest repayment are annualised i.e 4% per year over 15 years. Is it 4% of the total amount borrowed regardless of the time period its paid over?

I'm just guessing so please correct me if I'm wrong

No, as far as I know it's 4% of the total amount outstanding per annum. However, the longer term doesn't really mean anything in that respect because we're not likely to ever pay off the capital amount. What happens is this:

Year|Capital|Original bailout: 5.80%|New terms:3.75%
2011|50|2.9|1.88
2012|50|2.9|1.88
2013|50|2.9|1.88
2014|50|2.9|1.88
2015|50|2.9|1.88
2016|50|2.9|1.88
2017|50|2.9|1.88
2018|50|2.9|1.88
||Rollover|
2019|50|1.88|1.88
2020|50|1.88|1.88
2021|50|1.88|1.88
2022|50|1.88|1.88
2023|50|1.88|1.88
2024|50|1.88|1.88
2025|50|1.88|1.88
2026|50|1.88|1.88
Total||38.2|30


In the original scenario, the €50bn is rolled over at maturity, and re-funded with money borrowed on the market. To be kind, I've assumed it can be borrowed at the same rate as the bailout money - although 3.75% would have been a good rate at almost any period, and the actual market rate is likely to be higher.

So the original setup costs €38.2bn in interest payments over the next 15 years, while the new terms cost €30bn over the same time-frame, with all the savings front-loaded in the first 7.5 years. That's before we factor in inflation, which is what the government relies on to reduce the real value principal, or economic growth, which it relies on to reduce the fiscal drag of the interest payments - and for both of those, the lower interest longer period is better.

cordially,
Scofflaw

Stheno

I don't know much about economics, but I'd view this positively.

The interest rate is gone down, therefore our Opex has gone down.

It was unlikely we'd have repaid in the original timeframe anyway so now instead of hitting the bond markets in 7 years it's twice that.

If we make good progress we can test the waters of the bond markets having the assurance of the new deal.

The extended term will also cover the time we need to dissolve the bad banks like Anglo.

Overall I'd be positive about this, original disclaimer above applied long term we essentially have a fixed mortgage rate, giving us an opportunity in the shorter term to potentially exceed expectation and reduce our debt/reenter the markets.

kippy

The Unions don't appear to get the point:
Union leader Jack O’Connor has warned the revised terms of Ireland's bailout deal would mean nothing if the Government continued with the projected €3.6bn of cuts in Budget 2012.

Mr O’Connor, of Siptu, wants the saved revenue to promote job generating growth.

The eurozone deal which will see a 2% reduction in the interest rate on Ireland's EU/IMF bailout which will reduce the cost of the loan by around €800m a year.

The length of time Ireland has to repay the debt has also been doubled to 15 years.

“We are approaching the tipping point of no return, if we are not already over the brink, with cutbacks over the past three years on a scale unprecedented in any developed economy,” said Mr O’Connor.

“The revised terms offer the opportunity of scaling down the measures projected for Budget 2012.

“The Government must grasp the opportunity to reverse the downward direction of things, instilling hope in our people – otherwise yesterday’s announcement will ultimately serve only to exacerbate frustration and despair,” he added.



Related Stories:

22/07/2011 O'Connor: Govt must reverse cutbacks


http://breakingnews.ie/ireland/oconnor-govt-must-reverse-cutbacks-513761.html#ixzz1SojdhbPX

20Cent

kippy wrote: »

The Unions don't appear to get the point:
Union leader Jack O’Connor has warned the revised terms of Ireland's bailout deal would mean nothing if the Government continued with the projected €3.6bn of cuts in Budget 2012.

Mr O’Connor, of Siptu, wants the saved revenue to promote job generating growth.

The eurozone deal which will see a 2% reduction in the interest rate on Ireland's EU/IMF bailout which will reduce the cost of the loan by around €800m a year.

The length of time Ireland has to repay the debt has also been doubled to 15 years.

“We are approaching the tipping point of no return, if we are not already over the brink, with cutbacks over the past three years on a scale unprecedented in any developed economy,” said Mr O’Connor.

“The revised terms offer the opportunity of scaling down the measures projected for Budget 2012.

“The Government must grasp the opportunity to reverse the downward direction of things, instilling hope in our people – otherwise yesterday’s announcement will ultimately serve only to exacerbate frustration and despair,” he added.



Related Stories:

22/07/2011 O'Connor: Govt must reverse cutbacks


http://breakingnews.ie/ireland/oconnor-govt-must-reverse-cutbacks-513761.html#ixzz1SojdhbPX

O'Connor says we must reverse the downward direction, headline says must reverse cutbacks.

DJCR

How long (assuming we were going to) did we have to pay back the original Bailout? Was that 15 years as well?

Fratton Fred

I can't help but feel this is a bit of a red herring.

Ok, we are reducing our annual payments by €600m, but we are still overspending by €20bn.

Until we sort out the budget deficit, everything else is irrelevant, or am I missing this point here?

Irish Slaves for Europe

Fratton Fred wrote: »

I can't help but feel this is a bit of a red herring.

Ok, we are reducing our annual payments by €600m, but we are still overspending by €20bn.

Until we sort out the budget deficit, everything else is irrelevant, or am I missing this point here?

You're correct, the measures announced yesterday will do little to help Irelands situation. And the comments coming out about Irelands stance on the Common Consolidated Corporate Tax Base draft directive are extremely worrying.

beeftotheheels

Fratton Fred wrote: »

I can't help but feel this is a bit of a red herring.

Ok, we are reducing our annual payments by €600m, but we are still overspending by €20bn.

Until we sort out the budget deficit, everything else is irrelevant, or am I missing this point here?

We have longer loans at lower interest rates which is a good thing and not a red herring at all.

That we still need to balance our books is neither here nor there, we've always known that we need to balance our books.

It is a bit like a person on a diet just being given a new bicycle. It doesn't mean they can go out and indulge in a whole load of chocolate cake, but if they cycle to the shops instead of hopping into the car then the weight loss becomes a little bit easier.

So the gift of the bicycle will not make them thin over night, but it could help (rather than hinder) them losing weight over time, so it is not a red herring, it is a good thing.

Zubeneschamali

20Cent wrote: »

O'Connor says we must reverse the downward direction, headline says must reverse cutbacks.

The reverse of downward is upward, so the headline is accurate.

Scofflaw

DJCR wrote: »

How long (assuming we were going to) did we have to pay back the original Bailout? Was that 15 years as well?

No, 7.5 years.

cordially,
Scofflaw

View

It should be pointed out that Ireland remains subject to the terms of (the EU's) Excessive Deficit Procedure which applies when a member state fails to adhere to the "Maastricht criteria" (as most EU states current do). Under the current terms of our agreed procedure - which could be revised I would presume - Ireland is supposed to get its act together by 2014.

Failure to do so, or more importantly to be seen to be trying to do so, and Ireland is required to lodge a large amount of taxpayers' money with the ECB to be held in escrow. That deposit is forfeit if we don't then meet the criteria within a year or so of failing to meet the original deadline. In other words, we face a large fine if we decide we can just ignore our finances.

As such, any talk of "let's keep spending money like there is no tomorrow" should be regarded as nonsense.

fliball123

kippy wrote: »

The Unions don't appear to get the point:
Union leader Jack O’Connor has warned the revised terms of Ireland's bailout deal would mean nothing if the Government continued with the projected €3.6bn of cuts in Budget 2012.

Mr O’Connor, of Siptu, wants the saved revenue to promote job generating growth.

The eurozone deal which will see a 2% reduction in the interest rate on Ireland's EU/IMF bailout which will reduce the cost of the loan by around €800m a year.

The length of time Ireland has to repay the debt has also been doubled to 15 years.

“We are approaching the tipping point of no return, if we are not already over the brink, with cutbacks over the past three years on a scale unprecedented in any developed economy,” said Mr O’Connor.

“The revised terms offer the opportunity of scaling down the measures projected for Budget 2012.

“The Government must grasp the opportunity to reverse the downward direction of things, instilling hope in our people – otherwise yesterday’s announcement will ultimately serve only to exacerbate frustration and despair,” he added.



Related Stories:

22/07/2011 O'Connor: Govt must reverse cutbacks


http://breakingnews.ie/ireland/oconnor-govt-must-reverse-cutbacks-513761.html#ixzz1SojdhbPX

OConnor should shut the hell up this interest rate cut means nothing while we are overspending by 18billion..why cant this thick fcuk get that through his head and he is part of the reason why we cant reduce a fair proportion of what we spend

20Cent

Zubeneschamali wrote: »

The reverse of downward is upward, so the headline is accurate.

Not really, he doesn't say we need to reverse the cutbacks at all in the article but that's the headline!

Zubeneschamali

20Cent wrote: »

Not really, he doesn't say we need to reverse the cutbacks at all in the article but that's the headline!

O'Connor wants the Government to stop cutting back and to start increasing spending again, which is how I read the headline.

What do you think the headline means?

20Cent

Zubeneschamali wrote: »

O'Connor wants the Government to stop cutting back and to start increasing spending again, which is how I read the headline.

What do you think the headline means?

The headline sounds like he wants to reverse the cuts as in get rid of the paycuts and pension levy in the public service. He says he "wants the saved revenue to promote job generating growth". Sounds like a good idea. I'm no fan of O'Connor dislike him a lot actually but think the headline is a bit dishonest.

later12

Britain looks set to cut its rate to Ireland according to Tipperary man (jk) George Osborne

http://www.reuters.com/article/2011/07/22/britain-ireland-loan-idUSL6E7IM18920110722

"I've been arguing for some time that the interest rates charged for eurozone loans were too high," Osborne said in a statement.

"I'm pleased therefore they have now reduced those rates. That enables Britain to cut its rate on its loan to Ireland, while ensuring all of the benefit goes to Ireland and not to higher interest rates paid to euro area governments."

View

later10 wrote: »

Britain looks set to cut its rate to Ireland according to Tipperary man (jk) George Osborne

http://www.reuters.com/article/2011/07/22/britain-ireland-loan-idUSL6E7IM18920110722

The loan from the UK to Ireland is a bi-lateral loan. The UK has been free to lower the interest rate on it anytime they felt like it.

This looks like the EFSF interest rate reduction forced the UK to follow suit and Mr Osborne is declaring "Victory" while retreating.

Still it is to be welcome should we decide to use the bilateral UK-IE loan facility.

beeftotheheels

View wrote: »

The loan from the UK to Ireland is a bi-lateral loan. The UK has been free to lower the interest rate on it anytime they felt like it.

This looks like the EFSF interest rate reduction forced the UK to follow suit and Mr Osborne is declaring "Victory" while retreating.

Still it is to be welcome should we decide to use the bilateral UK-IE loan facility.

And one assumes/ hopes that the Swedes and Danes who also took our side in looking for an interest rate reduction from the EFSF could also be bounced into offering to reduce our rate.

later12

View wrote: »

The loan from the UK to Ireland is a bi-lateral loan. The UK has been free to lower the interest rate on it anytime they felt like it.

This looks like the EFSF interest rate reduction forced the UK to follow suit and Mr Osborne is declaring "Victory" while retreating.

Well George Osborne has divided loyalties, both to Ireland as a trading (and one should like to think, a friendly) partner and to the EU & Eurogroup on another level.

It could be considered poor form of the UK to be seen to somehow compete with the official bailout mechanism from Europe or the Eurozone. Surely that is the point of the different institutions and counterparties lending at similar rates. Applying lower rates on one side could be seen as a bit of a dirty trick to publicly pressure another lender to follow suit.

beeftotheheels

later10 wrote: »

Well George Osborne has divided loyalties, both to Ireland as a trading (and one should like to think, a friendly) partner and to the EU & Eurogroup on another level.

It could be considered poor form of the UK to be seen to somehow compete with the official bailout mechanism from Europe or the Eurozone. Surely that is the point of the different institutions and counterparties lending at similar rates. Applying lower rates on one side could be seen as a bit of a dirty trick to publicly pressure another lender to follow suit.

To that end did you note the Lib Dem's position? Nick Clegg lecturing Cameron on not treating Europe's difficulty as Britain's opportunity.

http://www.guardian.co.uk/politics/2011/jul/21/nick-clegg-david-cameron-eurozone

View

later10 wrote: »

It could be considered poor form of the UK to be seen to somehow compete with the official bailout mechanism from Europe or the Eurozone.

Well, David Cameron has apparently said to the (Tory) back-bench 1922 club that he would have liked to use the current Eurozone crisis to "re-patriate" powers from Brussels. The nasty Mr Clegg however didn't like that idea.

As such, I doubt that issues of "poor form" are a major factor in the Conservatives' decision making.

bamboozle

Fratton Fred wrote: »

I can't help but feel this is a bit of a red herring.

Ok, we are reducing our annual payments by €600m, but we are still overspending by €20bn.

Until we sort out the budget deficit, everything else is irrelevant, or am I missing this point here?

we gotta remember there is no quick fix to this, it not as if the govt can do 2 or 3 things and all will return to normal. We are facing a long hard period over the next 10 years, savings made on interest rates now mean that in theory the govt will have circa €600m to play with at budget time, this could be done by not cutting capital spending by 600m (which would mean 600m more to be spent on infrastructure with knock on effects of jobs etc) or the govt does not now need to raise another 600m in tax cuts via increased USC etc.

either way the job of reducing the 18billion national debt will still continue, we cant just fire civil servants, HSE HR Bums, teachers, gardai etc, what we can do is continue to encourage to senior public servants to retire, reduce the terms of employment for new entrants into the public service & continue to implement the croke park agreement and most importantly target social welfare expenditure - this will take a lot of time and many small steps.

ardmacha

An €800m reduction is interest is valuable, more valuable than any cut or tax increase of €800m. A cut or tax increase has multiplier effects, which reduces its effect, while the interest rate change stays in the economy.

later12

Interesting take on this from Nick Clegg alright. Has a politician with principles sneaked into the Commons and gotten to be deputy PM? The irony is that Clegg's style of politics is unlikely to do him many favours at the next election.

Even where his party vocally opposes unpopular moves like Tory plans for NHS reforms, they are not thanked for it. They seem to sit perpetually on 10%.

BluntGuy

bamboozle wrote: »

we gotta remember there is no quick fix to this, it not as if the govt can do 2 or 3 things and all will return to normal. We are facing a long hard period over the next 10 years, savings made on interest rates now mean that in theory the govt will have circa €600m to play with at budget time, this could be done by not cutting capital spending by 600m (which would mean 600m more to be spent on infrastructure with knock on effects of jobs etc) or the govt does not now need to raise another 600m in tax cuts via increased USC etc.

The capital budget has already been ripped to shreds to cover up the fact they're not making sufficient current expenditure savings. While in theory it would be nice to see more spent on necessary infrastructure, I am doubtful it's going to happen quite honestly.

later12

BluntGuy wrote: »

The capital budget has already been ripped to shreds to cover up the fact they're not making sufficient current expenditure savings. While in theory it would be nice to see more spent on necessary infrastructure, I am doubtful it's going to happen quite honestly.

I think ripped to shreds implies something far more savage that what we can observe in reality. In fact, cuts to the capital budget will plateau in 2014, at which point the current budget deficit will be thinner than the capital




I wouldn't describe either the capital nor the current budgets as being 'ripped to shreds' given the above scenario.

Pay packets, on the other hand...

Scofflaw

later10 wrote: »

I think ripped to shreds implies something far more savage that what we can observe in reality. In fact, cuts to the capital budget will plateau in 2014, at which point the current budget deficit will be thinner than the capital




I wouldn't describe either the capital nor the current budgets as being 'ripped to shreds' given the above scenario.

Pay packets, on the other hand...

Sorry - what's the source of that? And why doesn't the last total deficit figure seem right? Shouldn't it be €8,335 rather than €6,885?

quizzically,
Scofflaw

later12

Sorry, forgot to include the link, it's from pg. 24 of the Irish stability Programme update April 2011

http://www.finance.gov.ie/viewdoc.asp?DocID=6825&CatID=9&StartDate=1+January+2011

Scofflaw wrote: »

Shouldn't it be €8,335 rather than €6,885?

Yes, it should. Perhaps they're leaving out something, some sort of contingency provision to get the figure under the threshold?

later12

Hmm. Just browsing the EFSF website there, and whilst the EFSF interest rates will change around the end of 2011, as we know, the EFSF has already raised €3.6 billion for Ireland (€3.3bn disbused) at a rate of 5.9%.

But it seems that the new interest rate does not apply to standing disbursements, or any disbursements that shall be made before official amendment (expected around end 2011).

http://www.efsf.europa.eu/attachments/efsf_framework_agreement_amendment_agreement.pdf

It is acknowledged and agreed that the amendments to the Framework Agreement shall not alter or affect the rights and obligations of the Parties in relation to any Funding Instruments issued by EFSF with the benefit of a Guarantee issued under the Agreement prior to the Effective Date of the Amendments (the "Existing Funding Instruments"). The rights and obligations between the parties in relation to such Existing Funding Instruments shall continue to be governed by the terms and conditions of the Framework Agreement which applied prior to the Effective Date of the Amendments.

And Ireland's €3.3bn is about to be increased, as the EFSF is currently in the process of raising further debts for Ireland - at the old rate - and which will stay at the old rate.
Portugal has drawn down €5.8bn so far, and this too will remain at the old, higher rate of interest, as will any further disbursements for Portugal under the old banner.

Only funds raised after the official amendment will be eligible for the newer rate.

However, elsewhere, it is good to see that a lowering of the EFSM rate is now anticipated as well.

http://www.irishtimes.com/newspaper/ireland/2011/0723/1224301202444.html

Ireland has already been given about €11.4 billion of the €22.5 billion it will borrow from the EFSM, therefore will the interest rate change on that €11.4 billion already disbursed?

View

later10 wrote: »

Interesting take on this from Nick Clegg alright. Has a politician with principles sneaked into the Commons and gotten to be deputy PM? The irony is that Clegg's style of politics is unlikely to do him many favours at the next election.

Even where his party vocally opposes unpopular moves like Tory plans for NHS reforms, they are not thanked for it. They seem to sit perpetually on 10%.

The LibDems are suffering from the "mudguard" factor that junior parties in governments here are all too familiar with - namely, they get blamed for the unpopular policies (It wouldn't have passed, if you didn't vote for it!) whereas the larger party tends to get the credit for the popular policies.

Unfortunately, for the LibDems, if they walk away from government now, they'll get largely wiped out due to the FPTP system. Voters opposed to the government there, will vote Labour; voters in favour will tend to vote Conservative ("Vote Tory Lite" isn't a great electoral pitch).