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EUROPE’S NEWLY EXPANDED bailout fund will force Ireland to pay out over €11.1bn to help bail out Europe’s bigger economies, it has emerged.
The new European Stability Mechanism, which will replace the current EFSF and EFSM mechanisms in 2013, will originally be funded to the tune of €80bn by the 17 members of the Euro – with Ireland expected to do its bit, in spite of its own bailout loans.
If the fund is ever called into action – which it may be, if larger economies like Italy and Spain are priced out of the regular money markets – the fund will then expand up to an extraordinary €700 billion.
Ireland is required to cover just under 1.6 per cent of the cost of funding the new bailout pot – meaning it will have to pay at least €1.273bn in cash to take care of its share, and could have to stump up almost €10bn more if other bailouts are needed elsewhere.
Revealing Ireland’s obligations in a parliamentary question tabled by the Socialist Party’s Clare Daly, finance minister Michael Noonan said the initial €1.273bn would be paid in five equal instalments – of around €254m – beginning next July.
These €254m payments will be provided for in the usual December Budgets, Noonan added. The remaining €9.87bn will be offered in ‘callable capital’, to be paid whenever the bailout fund is called into action.
Noonan also confirmed that the treaty establishing the European Stability Mechanism, which was signed last month, does not contain an opt-out clause – meaning there is no way for Ireland to escape its obligations.
This lunchtime the prospect of an Italian default was reignited, with the money markets pricing a 10-year loan to Italy at over 5.75 per cent – approaching the 6 per cent mark after which borrowing would become relatively unsustainable.
Spain, too, saw its cost of borrowing surge to beyond the 6 per cent mark.
Ireland was originally exempted from having to fund Greece’s first bailout when it accepted its own in November of last year. Greece’s own bailout was organised before the EFSF came into being.
In a separate parliamentary response, Noonan confirmed that Ireland was set to draw down the next €6bn of its bailout loans next month. Ireland has already drawn down €17.8bn of its bailout loans.
Yesterday Noonan told the Oireachtas committee on finance that the reduced interest rate negotiated by Ireland last week would apply to the European loans Ireland had already drawn down, as well as the loans it may access in the future.
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DEAR EUROPE,
WE HAVE NO FUCKING MONEY LEFT.
Sincerely,
Ireland.
Taking blood from a patient receiving life supporting transfusions. How very strange.
Welcome to Europe, here’s your shovel, now start digging because we own you now !
I’d just like to thank all those who voted YES in the Maastricht, Nice, and Lisbon Referendums.
and were, in fact, “ordered” to do it twice
And what exactly do the aforementioned treaties have to do with Irelands membership of the €zone Daithi, please elaborate.
@Gemma
We weren’t obligated to vote any differently the second time. We could have voted no twice both times, couldn’t we?
The treaties took us farther away from Independence and closer to the fourth Reich. Thats a funny name Buckwheat, are you a plant ?
I’d like to thank them too, I’d hate to think what a backwater this country would be if it wasn’t for the €40 billion the EU gave us for free over the years. Sure the Germans made us all buy new houses and cars, while they saved their money – the bastards.
That 40 billion wasn’t free. We paid dearly for it. Among other things our fisheries were handed over to the Europeans. 40 billion is cheap for a continental shelf.
@ Daithi
That doesn’t answer my question. The UK, Denmark (ie non € countries, Daithi) etc are all signatories to the aforementioned treaties – so your statement still isn’t relevant.
Ps: I’m a geranium
Its my feeling that the more autonomy we have the better we can control our affairs. Since those referendums reduced our autonomy we are now more than ever subject to the dictates of the federation. I think the bailouts were imposed on us by Europe.
I really like the Pelargoniums :-)
Oh yes, you see we’re special here in Ireland – we should get lots of money out of the European pot, to cover our lovely roads and our moron housebuyers, but nobody should ever expect us to pay any money the other way. Good heavens no!
We have no money! Jasus.
Neither does anyone else! And they spotted us the few bob for the last round, so the taxi home is on us. If we all play nice, the kebabs might be free.
Well you’re going to have to run for it with that taxi, ’cause you spent all the shrapnel.
will this never end . we must be the laughing stock of Europe
What a masterstroke, we go to lower the interest rate and end up paying more, idiots.
Won’t actually cost us anything. We will (most likely) ‘lend’ the money to Spain or Italy at the same rate we borrow it from the Bailout Fund. Basically the Germans are giving us money to give to the Spanish.
Thats true, and sure whats 1.25 billion to us, when we are borrowing 19 billion a year anyway just to keep the light on. What a great little country this is.
Its basically a game of pass the parcel with financial add-ons all each time. see Max Keiser and Gerald Celetene explain the whole madness, we are being duped, no doubt
http://maxkeiser.com/2011/06/25/on-the-edge-with-gerald-celente-2/
Dear jebus Max Keiser is worse than watching Fox news and that’s saying something.
We need a new international monetary system, abolish private central banks and fractional reserve lending and introduce debt free currency.
At last someone is talking sense. Banking is a form of legal fraud, because no bank in the world can pay out every single customer. However the form of fraud perpetrated by banks (lending out money they don’t have, investing customer money in companies to feather their own nests) has led to price inflation, meaning that we cannot possibly live our lives without going into debt at some point.
The only difference between the respectable bank and Ponzi scheme is that the bank is – well – a better confidence trickster, managing to hide its fraudulent activity in plain sight, under a load of financial mumbo jumbo.
I’m not some loony Marxist talking here. The Austrian School has been making much more elaborate arguments about this for decades or more.
Never ending spin n bullshit. Default already and lets get on with our lives!
When it comes to the crunch Minister Noonan will make an argument against being able to pay this size of contribution and he will win !
so this is why we have to pay for water and stump up a property tax aswell,after paying for my house i live of 172 euro a week and thats for me my wife and two children what am i to do ? leave all the other bills so the government can have there feed first.
“We’ve achieved a substantial interest rate reduction and greater flexibility in terms of the fund without conditions attached,” he said. (Enda Kenny last week)
Ireland was originally exempted from having to fund Greece’s first bailout when it accepted its own in November of last year.
Noonan also confirmed that the treaty establishing the European Stability Mechanism, which was signed last month, does not contain an opt-out clause (today)
This looks like the deal they struck: 2% interest rate cut for agreeing to contribute to future bailouts at an initial cost of 11bn.
An independent Ireland is the “opt out clause”.
Thanks Fianna Fail… Thank you very much… Love you long time…..
do advise you to read the blog post that I wrote following my meeting at the Central Bank of Ireland:
well done Fiachra on cogging from the zeitgeist addendum
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