The Eurozone has Agreed on the Rescue Package for Ireland
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The Eurozone has Agreed on the Rescue Package for Ireland
It is now up to us to turn our fortunes around
The European Union and the Irish Government announced yesterday evening that Ireland will be provided with € 85 billion in financial support. This comes as a result of the largest economic and financial crises that Ireland has faced since the foundation of the state. It is clear that a combination of our significant issues within our banking sector and the economic downturn have become so severe that the Irish Government must look for external financial assistance.
The rescue package is made up of several different funds and they are as follows
€ 17.5 billion – The National Reserve Fund and Cash Reserves
€ 22.5 billion – European Financial Stability Mechanism
€ 22.5 billion – International Monetary Fund
€ 22.5 billion European Union Stability Fund and bilateral loans from the UK, Sweden and Denmark.
The usage of our own funds to assist in this package has been met with severe criticism from Opposition Parties and many Interest Groups.
The € 85 billion rescue package shall be used for the following purposes
€ 50 billion to Cover the financing of the State
€ 35 billion shall be used for the Irish Banking System
€ 10 billion for immediate recapitalisation
€ 25 billion of a contingency fund to be held in reserve.
The combined annual interest rate would be of the order of 5.8% if the funds were drawn down today, however such a rate is likely to increase as more funds have been called upon in the future. Many economic commentators have stated that this is a mechanism that will force Ireland to re-enter the bond markets at some stage in the future in the hope that such extreme conditions that Ireland has faced over the previous months will have stabilised.
The average length of these loans is seven and a half years and this will result in an increase in our National Debt, however the Taoiseach has stated that such Debt is “sustainable” on the back of the implementation of the National Recovery Plan. Ireland has also been granted an extra year to achieve its budget deficit reduction target to 2015.
Plans to restructure the banking sector are currently underway and these plans shall be implemented in 2011.
This Rescue Package is a clear indication that the European Union wants this unprecedented financial crisis affecting the Eurozone to be resolved and stop the suspected “contagion” spreading to other EU economies.
John McCarrick
John McCarrick and Associates
11 Dunville Avenue, Rathmines
Dublin 6,Ireland
Telephone:01 4960102
Fax: 01 4973717
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