Is the interest rate on EU money not actually 7.25% taking account of our NPRF

Phoenix_Rising

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Jul 18, 2010
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Well on the rte nine news Sean Whelan figured, if I heard correctly, the IMF 3-4% really equated to 5.7% over the longer period, the money from the EU commission was being charged at 7% and that from the EFSF was at 6.4%. Quite confusing!
So the IMF is 3-4% if paid back over 3 years but will equate to 5.7% if we take the full 7 and a half years to repay it?

5.7% IMF + 6.4%ESF + 5.7%EU = 5.93%...anyone else confused?
 


TWB10

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Nov 28, 2010
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The rate of interest on the bailout

(1) NPRF €17.5bn @ 0.00%, current opportunity cost 4.90%

http://www.nprf.ie/Publications/2010/Q32010NPRFPerformance.pdf

(2) IMF €22.5bn @ 3.12% for first 3 years and 3.99% thereafter upto 10 years.

Press Release: IMF Reaches Staff-level Agreement with Ireland on €22.5 Billion Extended Fund Facility Arrangement

This gives a blended rate of 3.73% over 10 years,

Mr Chopra said on RTE news that it could rise to 4.5% after initial period.

We know that the EFSF has a lower rate than the EFSM,

(3) If we assume that the EFSF €22.5bn is @ 6.50% and

(4) We assume that the EFSM €22.5bn is 7.25%

This gives a blended rate of 5.83% for the €67.5bn

and implies a penal borrowing rate of 6.875% from Europe equivalent to ECB + 587.5bps.
(similar to the 6.9% that has been speculated)

This assumes the worst case scenario and the full €85 bn is drawn down and highlights the penalties that incentivise Ireland not to do so.
 

Finbar10

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Dec 3, 2008
Messages
2,678
The rate of interest on the bailout

(1) NPRF €17.5bn @ 0.00%, current opportunity cost 4.90%

http://www.nprf.ie/Publications/2010/Q32010NPRFPerformance.pdf

(2) IMF €22.5bn @ 3.12% for first 3 years and 3.99% thereafter upto 10 years.

Press Release: IMF Reaches Staff-level Agreement with Ireland on €22.5 Billion Extended Fund Facility Arrangement

This gives a blended rate of 3.73% over 10 years,

Mr Chopra said on RTE news that it could rise to 4.5% after initial period.

We know that the EFSF has a lower rate than the EFSM,

(3) If we assume that the EFSF €22.5bn is @ 6.50% and

(4) We assume that the EFSM €22.5bn is 7.25%

This gives a blended rate of 5.83% for the €67.5bn

and implies a penal borrowing rate of 6.875% from Europe equivalent to ECB + 587.5bps.
(similar to the 6.9% that has been speculated)

This assumes the worst case scenario and the full €85 bn is drawn down and highlights the penalties that incentivise Ireland not to do so.
Thanks. That's very clear.
 

Indiansign

Member
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Apr 13, 2010
Messages
54
This spin on the interest rate has been gobbled up by the media, and makes my blood boil.

Also, just to point out *ahem* my post #17

So the average interest rate on 85bn is 5.8%. Given that 17.5bn of this amount is our own money and therefore interest free, doesn't that mean that the rate on the rest is significantly higher than 5.8%
...in the same thread as Seabhcan's post #23

I'm not so sure - I think they are trying to spin it.

Presumably the pensions reserver funds are at 0%, as its already our money. They form about 20% of the total amount. If one fifth of the amount is at zero percent, and the average is 5.8% - what is the interest on the rest of the money? I calculate 7.25%
Sorry to be pedantic but no one likes to be ignored.
 

nuj

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Joined
May 26, 2004
Messages
518
I couldn't access the site to point it out either! Tho' I worked it out at 7.34%. (85*5.83/67.5).

You were dead right.
 


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