Reduction in bailout interest rate an important step forward

Fine Gael TD for Dublin South, Peter Mathews, said today that the elimination of the profit margin on Ireland’s bailout from Europe is a very positive step forward.

“When this Government came to power, the majority of the interest paid on the bailout loans was profit for our European partners. Minister Noonan persistently raised the need for a reduction in this rate. It was unfair and counterproductive.

“I have strongly argued over the last number of months that the profit margin should be eliminated. Irish Government yields have collapsed by almost 40% since Europe announced that the profit margin would be reduced last July. Today’s news that the profit margin will be eliminated entirely and that this lower interest rate will apply to money already borrowed is further good news. It is clear that the elimination of the profit margin will hasten Ireland’s return to the markets. This is a very welcome show of solidarity from our partners in Europe.

“In January, the European Financial Stabilisation Mechanism charged Ireland an interest rate of 5.51% for money that it borrowed at 2.59%. A month later, the European Financial Stabilisation Fund charged Ireland an interest rate of 5.9% for money that it borrowed at 2.89%. On this basis, the EFSF charged a profit margin of 3.01% and the EFSM charged a profit margin of 2.93%.

“Based on these figures, the profit margin that Ireland would have been charged was €1.1 billion each year when the loans were drawn down in full. This is a huge saving for the Irish taxpayer.”