Interest rate on EU Stability Fund loan is over 6% - Karl Whelan

He3

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I wouldn’t be surprised if the true effective cost of this loan is understated by the 6.05% figure, for instance because it doesn’t include the up-front service fee or the role played by the cash buffer.

A full detailed explanation of the EFSF rate from either the Irish government or the EFSF would be very welcome.


The Irish Economy » Blog Archive » EU-IMF Bailout Borrowing Rates

Was there a single trick that Ireland's negotiators were able to trump:

This seems to mean that we are paying the service fee and margin up front. In addition, we are going to pay interest on a cash buffer, which is money kept by EFSF that we’ll never see.
 


hammer

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Isn`t it absolutely insane that we still do not know the interest rate we are borrowing at :(

Tomfoolery !!!

Could you imagine organising your mortgage, and you came home with that explanation.

Lendahand 0/10
 

Doodah

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All assets and cash in the Pensions Reserve Fund should be transferred immediately into a series of disparate accounts or converted to a series of different assets under another name. Any competent Irish accountant could provide details on how to do it.

At least 10 euros plus a promissory note (just in case, if questions are asked) should be allowed to remain in the PRF prior to Tuesday's budget which represents the final lock on the bail-out/asset-strip deal and the annexation of the cash to protect the banks' EU bondholders.

The Irish genius for Shnakeyness makes such a stunt possible. :)
 

Mitsui2

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All assets and cash in the Pensions Reserve Fund should be transferred immediately into a series of disparate accounts or converted to a series of different assets under another name. Any competent Irish accountant could provide details on how to do it.

At least 10 euros plus a promissory note (just in case, if questions are asked) should be allowed to remain in the PRF prior to Tuesday's budget which represents the final lock on the bail-out/asset-strip deal and the annexation of the cash to protect the banks' EU bondholders.

The Irish genius for Shnakeyness makes such a stunt possible. :)
I still suspect that the Pension Fund is actually already empty, and that the supposed insistence on using it for the banks is actually designed to ensure that FF don't have to admit the fact.
 

hammer

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Wouldn`t be surprised if the NPRF funds were "rested" in Fianna FAIL HQ account for a few weeks. Interest could finance their GE campaign. Might get their support up to 15% :) :) :)
 

Mossy Heneberry

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Isn`t it absolutely insane that we still do not know the interest rate we are borrowing at :(

Tomfoolery !!!

Could you imagine organising your mortgage, and you came home with that explanation.

Lendahand 0/10
I was listening to WLR radio approximately a year ago. Some wan from MaBs had the following to say about mortgage holders

* They don't know who their mortgage lender is, some thinking it is the mortgage broker.
* They don't know what the term of their mortgage is or the capital portion.
* They don't know exactly what the interest portion of their mortgage is.
* They don't know the type of interest they have, whether it's fixed, variable or tracker.

About 18:00 mins in http://www.wlrfm.com/DesktopModules/UltraVideoGallery/mp3.swf?vId=963&portalId=6
 

Malbekh

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It should be easy to work out. Just need someone with a bit of mathematical skills.

The bail-out package is €85b
We are contributing €17.5b of our own money up front. While this is at 0% I really don't think that it is included in the overall interest rate.

This leaves €67.5b of which the IMF are providing €22.5b over three years at 3.12% over three years. This would rise to just under 4% if the money is drawn down over 4 years. Presumably, we will draw down this funding first because it's cheaper and the only one we know that has a fixed period attached.

The EU loan portion therefore is €45b. It's over a longer period of time, probably 6-7 years, so you would expect it to be at a higher rate of interest. To figure it out, you just need to aggregate the amount.

So if Johnny has one loan for €22.5b at 3.12% over three years, and one loan for €45b over six years. How much is the interest on the second loan, if Johnny's aggregate loan interest is 5.83%?

So could somebody smarter than me (not hard) work this out based on the fact that the overall interest rate must assume draw down of both loans from day one. So for the first three years both loans are drawn down, and the last three years only the EU one.

My instinct tells me it's around 7%



Answer?
 

Paulitics

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It should be easy to work out. Just need someone with a bit of mathematical skills.

The bail-out package is €85b
We are contributing €17.5b of our own money up front. While this is at 0% I really don't think that it is included in the overall interest rate.

This leaves €67.5b of which the IMF are providing €22.5b over three years at 3.12% over three years. This would rise to just under 4% if the money is drawn down over 4 years. Presumably, we will draw down this funding first because it's cheaper and the only one we know that has a fixed period attached.

The EU loan portion therefore is €45b. It's over a longer period of time, probably 6-7 years, so you would expect it to be at a higher rate of interest. To figure it out, you just need to aggregate the amount.

So if Johnny has one loan for €22.5b at 3.12% over three years, and one loan for €45b over six years. How much is the interest on the second loan, if Johnny's aggregate loan interest is 5.83%?

So could somebody smarter than me (not hard) work this out based on the fact that the overall interest rate must assume draw down of both loans from day one. So for the first three years both loans are drawn down, and the last three years only the EU one.

My instinct tells me it's around 7%



Answer?
Working backwards from the total package of 85 billion at a blended rate of 5.8% and allowing 3% opportunity interest cost on the Irish portion of 17.5 billion, EU sourced funding maybe costing 7.8% although this model is probably oversimplistic. But here you go for what its worth...


Funds...................€Bil'ns...........Interest %..........Interest €Bil'ns
IMF........................22.5...............4.0%....................0.9
Ireland...................17.5...............3.0%....................0.5
EU Sources.............45.0...............7.8%....................3.5
Total......................85.0...............5.8%...................4.9

Total Interest at blended rate of 5.8%........................4.9
 

Sucker Punch

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Working backwards from the total package of 85 billion at a blended rate of 5.8% and allowing 3% opportunity interest cost on the Irish portion of 17.5 billion, EU sourced funding maybe costing 7.8% although this model is probably oversimplistic. But here you go for what its worth...


Funds...................€Bil'ns...........Interest %..........Interest €Bil'ns
IMF........................22.5...............4.0%....................0.9
Ireland...................17.5...............3.0%....................0.5
EU Sources.............45.0...............7.8%....................3.5
Total......................85.0...............5.8%...................4.9

Total Interest at blended rate of 5.8%........................4.9
The 45bn which is being extended from EU sources, is I believe, the funding allocated to deal with the deficit over the coming years. This means that in all likelihood it will be drawn down.

So in order to comply with the growth and stability pact we have the pleasure of paying 3.5bn.

Remind me, how much France and Germany paid when they repeatedly broke the pact earlier during the decade?
 

He3

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Approximately zero?
 

Clanrickard

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Approximately zero?
Correct. In fact France is currently breaching the GSP. We are being punished for our corpo tax rate and for being "Anglo-Saxon". On the bright side the scales have fallen from many Irish eyes and we can see the hectoring bullying nasty side of the Europroject. Paddies know your place!
 

Mister men

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Isn`t it absolutely insane that we still do not know the interest rate we are borrowing at :(

Tomfoolery !!!

Could you imagine organising your mortgage, and you came home with that explanation.

Lendahand 0/10
Yes it is crazy but i expect nothing less from a lame duck government.
 

ibis

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The 45bn which is being extended from EU sources, is I believe, the funding allocated to deal with the deficit over the coming years. This means that in all likelihood it will be drawn down.

So in order to comply with the growth and stability pact we have the pleasure of paying 3.5bn.

Remind me, how much France and Germany paid when they repeatedly broke the pact earlier during the decade?
Hmm - did they have to get a bailout because they couldn't afford to borrow on the markets? No. Did we? Yes. So, does the comparison stand? No.
 

cul de sac

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WTF? 7% from our "partners". If so then this figure effectively kills the European dream. What a bunch of dopes. The real cost of this kangaroo court like deal will unfold in the long run for the Eurozone.

With one fell swoop, solidarity is dead, common foreign policy is dead, further integration is dead, the European parliament is dead. Ireland will be one of the most staunch Eurosceptic countries in the EU to rival the UK soon.

No doubt King Spoof Lendahand will spin this to our advantage but Jesus, 7%? They must want to destroy us...
 

Clanrickard

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Hmm - did they have to get a bailout because they couldn't afford to borrow on the markets? No. Did we? Yes. So, does the comparison stand? No.
Lets see if France ever get into the same situation whether they will be charged the same rate. Remember much of the debt is ban related and much of it on the orders of the ECB. Are they sharing the blame? Are they hell!
 

evercloserunion

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Working backwards from the total package of 85 billion at a blended rate of 5.8% and allowing 3% opportunity interest cost on the Irish portion of 17.5 billion, EU sourced funding maybe costing 7.8% although this model is probably oversimplistic. But here you go for what its worth...


Funds...................€Bil'ns...........Interest %..........Interest €Bil'ns
IMF........................22.5...............4.0%....................0.9
Ireland...................17.5...............3.0%....................0.5
EU Sources.............45.0...............7.8%....................3.5
Total......................85.0...............5.8%...................4.9

Total Interest at blended rate of 5.8%........................4.9
Is 3% opportunity interest cost realistic, and are you sure it's taken into account in arriving at the blended rate of 5.8%?
 

ibis

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Lets see if France ever get into the same situation whether they will be charged the same rate.
If they're going to the EFSF they'll have to pay whatever the IMF want at that time, because that's the way the EFSF is structured - the differences in the rates result mostly from the different forms of conversion (SDR-Euro on floating rates for IMF, versus fixed rates for the EFSF).

Remember much of the debt is ban related and much of it on the orders of the ECB. Are they sharing the blame? Are they hell!
They've bought more of our banks' crap debt than anyone else.
 

Clanrickard

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If they're going to the EFSF they'll have to pay whatever the IMF want at that time, because that's the way the EFSF is structured - the differences in the rates result mostly from the different forms of conversion (SDR-Euro on floating rates for IMF, versus fixed rates for the EFSF).

The IMF has a set formula but the European Funds do not hence the much higher rates.

They've bought more of our banks' crap debt than anyone else.
Because they won't allow the banks to be liquidated and they didn't want them nationalized. All to protect big countries banks.
 


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