How is Ireland's deal better than Greece's?

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davidcochrane
The Taoiseach Brian Cowen told the Dáil yesterday that the arrangement with the EU/IMF was a better deal than that of Greece's, as did Minister for Finance Brian Lenihan today.

it has been claimed that we are paying a higher interest rate than Greece even though Greece is now seeking our terms. The interest on Greek loans is 5.2% for 3 year loans. Ireland’s interest rate will be 5.8% for loans that are on average for 7½ years. A basic fact of sovereign borrowing is that the longer a country borrows money, the higher the interest rate paid.
Brian Lenihan TD, Minister for Finance​
So, my junior cert business studies is a bit dusty, but the two interest rates are different, and Greece's interest rate is lower than ours. (5.2% versus 5.83% for Ireland). Secondly, the terms are different, the loan is over three years for Greece, and seven and a half years for Ireland.

So, if Greece borrowed €100 at 5.2% interest over 3 years - the cost of borrowing would be €16.43 (with €116.43 being paid back)

For Ireland, it would be €100 at 5.83% interest over 7.5 years - the cost of borrowing would be €52.44 (with €152.44 being paid back).

So, have I missed something here - surely a larger interest rate over a longer period of time is actually worse. Er, right?
 


EvotingMachine0197

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I had assumed the higher rate was to cover the higher risk of not been able to repay for a longer period.

Aren't long term bonds usually higher for this reason ?
 

greengoose2

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The Taoiseach Brian Cowen told the Dáil yesterday that the arrangement with the EU/IMF was a better deal than that of Greece's, as did Minister for Finance Brian Lenihan today.



So, my junior cert business studies is a bit dusty, but the two interest rates are different, and Greece's interest rate is lower than ours. (5.2% versus 5.83% for Ireland). Secondly, the terms are different, the loan is over three years for Greece, and seven and a half years for Ireland.

So, if Greece borrowed €100 at 5.2% interest over 3 years - the cost of borrowing would be €16.43 (with €116.43 being paid back)

For Ireland, it would be €100 at 5.83% interest over 7.5 years - the cost of borrowing would be €52.44 (with €152.44 being paid back).

So, have I missed something here - surely a larger interest rate over a longer period of time is actually worse. Er, right?
Look Dave, Lenihan will try to convince the people that black is the new white! The bottom line in this bloody freak show is that we should never have had to go begging for loans. These monkeys screwed up their brief and now display an extreme arrogance and self pride in tackling their own mess.

A sorry end to a sorry party!
 

ONQ

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The Taoiseach Brian Cowen told the Dáil yesterday that the arrangement with the EU/IMF was a better deal than that of Greece's, as did Minister for Finance Brian Lenihan today.



So, my junior cert business studies is a bit dusty, but the two interest rates are different, and Greece's interest rate is lower than ours. (5.2% versus 5.83% for Ireland). Secondly, the terms are different, the loan is over three years for Greece, and seven and a half years for Ireland.

So, if Greece borrowed €100 at 5.2% interest over 3 years - the cost of borrowing would be €16.43 (with €116.43 being paid back)

For Ireland, it would be €100 at 5.83% interest over 7.5 years - the cost of borrowing would be €52.44 (with €152.44 being paid back).

So, have I missed something here - surely a larger interest rate over a longer period of time is actually worse. Er, right?
The benefit is the amount you have to pay back PER YEAR - as anyone who has taken out a car loan will tell you.

3 year loans are great if you can affrod to pay that kind of whack per annum, but although you may more on interest charges over the five years, the total cost per year is lower.

For many its the differecne between making the payments and not doing so, so many people take out five year car loans.

In payng back less per annum, the hope is that a weaker economy will not be buckled completely by this load.

Whether we should be paying this at all without our banks STILL not lending and our recovery only a paper exercise without any jobs being created is another question.

Our job in the interim is to help the economy recover - get the banks lending again so that people can get back to work and pay off their debts.

Or else clear out the banks top brass and thrown them in prison for "economic treason".

Or preferably, both.

ONQ.

=================================================
Get the Banks Lending Money again so as to enable the Recovery.

Tax the $14 Quadrillion Dollar Derivative Market to repay the Debt.
=================================================
 

olamp

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Saw on Bloomberg that Greece got an extension on their loan -It said 6yr.extension -not clear whether that`s an extra 6yrs.or bringing it up to 6 yrs. Nothing said about an extra rate of interest to facilitate this extension
 

adrem

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The Taoiseach Brian Cowen told the Dáil yesterday that the arrangement with the EU/IMF was a better deal than that of Greece's, as did Minister for Finance Brian Lenihan today.



So, my junior cert business studies is a bit dusty, but the two interest rates are different, and Greece's interest rate is lower than ours. (5.2% versus 5.83% for Ireland). Secondly, the terms are different, the loan is over three years for Greece, and seven and a half years for Ireland.

So, if Greece borrowed €100 at 5.2% interest over 3 years - the cost of borrowing would be €16.43 (with €116.43 being paid back)

For Ireland, it would be €100 at 5.83% interest over 7.5 years - the cost of borrowing would be €52.44 (with €152.44 being paid back).

So, have I missed something here - surely a larger interest rate over a longer period of time is actually worse. Er, right?

Long term money costs more than short term money because the risk of default is greater and because of the time value of money. If I have to pay you back your 100 in 3 years time I need to save more now than if I have to pay you back your 100 in 7 years time (discounted value of 100 in 7 years being substantially lower than the discounted value of 100 in 3 years).

There is also a moratorium on capital repayments in the initial period which Greece, with the shorter deal, didn't get as good a deal on. Overall we got a better deal than Greece - Greece has since renegotiated a change to their term so they are probably close to being equivalent now.
 

Shambo

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I have been asking Stephen Kearon (late of this parish I believe) for a link to an actual story in a publication of some sort anywhere, but he has decided not to reply, through either ignorance or lack of such a link; so can ANYONE show that the Greeks do indeed want to copy the tens of the Irish bailout? I mean , are the Irish media blithely taking Clowen's claim to be true?
 

wellfkmepink

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So, have I missed something here - surely a larger interest rate over a longer period of time is actually worse. Er, right?
larger interest rates over a longer period are explained by

Opportunity cost of tying up money for a longer period
Expected increase in the risk free (ECB) interest rate
Increased possibilty of default over a longer period

Yield curve - Wikipedia, the free encyclopedia
 

Hooch

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Lenihan barely passed Ordinary Maths.

Despair.
 

liamfoley

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Cowen said that the Greeks were trying to renegotiate their terms along teh lines of the Irish "deal," is that so? If so, why?
 


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