Belfast Telegraph

Tuesday 16 September 2014

EU debt woes are the billion dollar question

A billion used to be a lot of money. It was generally used to describe a figure so far out of reach of us mere mortals as to be a pipe dream. Not any more.

Take a look at the business pages these days and you'll see reports on any number of deals which make billionaires of the most unlikely people.

From Facebook's Mark Zuckerberg to LinkedIn's Reid Hoffman, the number of billionaires keeps growing each year.

And it's not just in the US. On their own, the 1,000 richest people in the UK could have used their £395.8bn (that 0.8 is very important and would keep me in cheese sandwiches for a while) to bailout Ireland, Greece and Portugal without breaking sweat.

But whether they'd be able to keep bailing them out is another story.

Greece has had another look at its bank account and reckons it's going to need another €60bn to cover its back until 2013. Maybe it's accountants have a temperamental spreadsheet or maybe it lost the fag packet on which it wrote the original calculation.

We may never know but what's clear is the IMF and European Union are going to have to step in to help once more.

Ratings agency Moodys certainly isn't impressed with Greece's performance and warned of a 'multi-notch' downgrade - something the straining belts of Greece's ministers haven't seen for some time - if it finds the debt is unsustainable.

In an effort to help, the EU has said it will look at reducing the interest rate on Greece's debt but they probably won't have time to when it meets next week to approve Portugal's €78bn rescue package.

They've also agreed to have a go at reducing the Republic's debt although Enda Kenny has said no decision has yet been made.

"The Commission has already some time ago proposed that we would have a reduction of the interest rate for Ireland, in order to help Ireland overcome its debt burden, in the same way as Greece, or now Portugal, and I would expect that this kind of an agreement could be taken shortly," Olli Rehn, the European commissioner for economic and monetary affairs, said yesterday.

If Ireland does get a interest rate reduction, France and Germany, who will have to bear the burden of lost interest revenue, want an increase in the region's corporation tax level of 12.5% but the likelihood of that looks small.

If the Republic didn't budge on the issue of corporation tax when it was negotiating for the bailout money in the first place then it's hardly likely to budge on the issue now.

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