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Greece loan package requires Irish legislation

Read more about: Economy, Europe, NAMA     Print This Post

Compared to the billions going to the banks (and perhaps soon needed for Quinn), the mere €450m that we will lend to Greece “centrally pooled by the European Commission” may not seem like much.  But according to Brian Lenihan –

“The costs of all countries participating, including Ireland, in this facility would be fully covered. Ireland’s participation would require national legislation.”

Now this government is good at ramming through legislation, and if independents like Finian McGrath weren’t balking at NAMAnglo, they are unlikely to question this one. But this is a loan going to a country with nasty debt dynamics. So who is covering the cost of Ireland’s participation?

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7 Responses to “Greece loan package requires Irish legislation”

  1. # Comment by Veronica Apr 12th, 2010 11:04

    P,

    According to the DoF press release: “The cost of a 3 year fixed rate to Greece under this arrangement would be around 5%. The 3 year yield on Irish Government bonds is around 2.35% at present.” By inference, then, bizarre and all as it seems, Ireland stands to make a profit on any loan to Greece if it is called upon to make such a loan.

    The purpose of the package, in combination with loans that will be offered by the IMF, is to (a) protect the euro and (b) ease Greece’s immediate international borrowing problems, bringing rates of interests on its bonds back within a limit of around 5%. If it achieves the latter objective, then Greece will not need to draw down the EU/IMF package.

    Overall, as I understand it, the combined EU/IMF funding package is worth about 55bn euro, enough to cover Greece’s borrowing requirements for this year (estimated 35bn euro) and well into next year. However, if the Greek government is forced into reliance on this lifeline, then the package of austerity measures and tax hikes that have caused street riots in Athens will seem like a picnic compared to what will be enforced by the IMF and EU.

    Do you have a problem with Ireland participating in an EU bailout of Greece? If so, what alternative do you suggest?

  2. # Comment by P O'Neill Apr 12th, 2010 12:04

    Yes they can make money on the spread but there is some risk. If the loan package, when tapped, doesn’t definitively solve Greece’s debt problems, the last step is restructuring i.e. haircuts.

  3. # Comment by Veronica Apr 12th, 2010 15:04

    P,

    The risk arises if Greece defaults on the EU loans two to three years down the line. Before that happens there will be the option of restructuring the debt and agreeing a further austerity programme with the EU/IMF to pull the wool out of the fire. Either that, or economic recovery will start to make inroads into their deficit, so the problem won’t be as severe in a couple of years. It seems to me that people can have a glass half full, or half empty, perspective but the reality for all small cash strapped countries is that it’s a step by step, sometimes very painful, process about which there can be no long term certainties either way.

    After Greece, it’s Portugal; or so some of the ‘experts’ predict. (For the moment Ireland seems to be off the agenda of likely defaulters.) They seem to revel in their doom laden predictions, these folks, especially the British based ones, usually to the extent that it conforms with a deep seated anti-EU agenda. Strangely, they never really focus all that much on their own backyard and what’s been piling up in it for the past couple of years. Arguably it may soon be the UK’s turn in the spotlight – everyone I know in that Kingdom expects an avalanche of cuts in public spending after the GE, irrespective of who wins.

  4. # Comment by Lucrezia Reichlin Apr 30th, 2010 14:04

    What they need is capital gain, and financial experts on how to move the economy to next level, monitor banking policies, open markets, welcome foreign investors, foreigners with ideas, invest on their culture and trade with Africa Countries and as well produce products with trademark. Any support, email me ob: mrslucrezia@yahoo.com

  5. # Comment by Veronica May 4th, 2010 11:05

    Lucrezia,

    It may take several years, even a whole generation, for the transformation in the Greek economy that you suggest. The €110bn bailout from the EU/IMF offers a breathing space for the next two to three years, but most commentators are agreed that it’s up to Greek society and its political leaders to make the best use of this opportunity to get their fiscal house in order and lay the economic and social foundations for change. If they don’t, or if they can’t, then sovereign default or a structured default via rescheduling of debts appears inevitable, which would make things worse for the Greeks than they’re going to be already. It also seems that unlike other EU peripheral countries, such as Ireland, Greece will not derive much benefit from any upturn in world trade inhte short term because they simply don’t produce enough tradeable exports. So it looks like a long hard slog ahead.

    One thing that really concerns me, though, over the past few days are stupid politicians and pundits here speaking out of both sides of their mouths on Ireland’s contribution to the Greek rescue package. Now if the boot was on the other foot, they’d have no problem calling for the Greeks to put their hands in their pockets for a handout.

  6. # Comment by blue monkey May 14th, 2010 02:05

    Greece and Spain won’t pay back. This was a calculated Risk, and a Lesson for the Banking System. What is happening in Greece, is a very well orchestrated show, to get granted €110bn aid, to avert meltdown. A new deception compared with the old Trojan Horse. The only thing Germans can do is:
    REPOSSESS 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain.
    U.S.A must REPOSSESS 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever …
    Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged.
    Greece’s problem is too much debt. Greece has a budget deficit of 12.7% of GDP – meaning that the country is spending 12.7% more than the value of one year’s economic output.
    Greece is no different to a serial credit card borrower who can’t pay back his loans. But just like a serial credit card borrower, as long as Greece keeps relying on borrowed money to fund itself, the problem won’t go away. It will just get worse.
    http://www.defenseindustrydaily.com/Greece-in-Default-on-U-214-Submarine-Order-05801/
    But don’t worry; the ECB, the Fed or both will print the money.
    And all of us will share the pain, with our hard-earned money.
    Bad is never good until worse happens.

  7. # Comment by Dr. Ihejirika I. Ebenezer Aug 17th, 2010 20:08

    I always have the dream in mind to make an impact in the Africa Community as a medical practitioner. Where I come from, the Eastern part of Nigeria, Imo-State, I have decided to take it upon myself to eradicate the eye problems, which have eaten deep within the people leaving in its rural communities.

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