UK loans Ireland £3.25bn
Published 16/12/2010 | 02:31
MPs have approved a loan of up to £3.25bn to bail out the Irish economy after legislation was rushed through the Commons in a day.
Chancellor George Osborne said helping Ireland recover from the banking crisis was “overwhelmingly” in the interest of British taxpayers.
The move came as the Irish government won a crucial vote to accept an €85bn (£71.4bn) rescue package from the International Monetary Fund and Europe.
Mr Osborne said: “People ask, of course, why are we extending the loan to Ireland? We are doing this because it is overwhelmingly in our national interest that we have a strong Irish economy and a stable banking system.
“It is not just about the Irish economy and Irish jobs, it is about the British economy and British jobs.
“A loan does not add to our deficit and any increase in borrowing is matched, of course, by the commitment of the Irish to repay with interest.”
It was anticipated that the loan would result in fees and interest of £440m for the UK, Mr Osborne said.
The Chancellor added: “Ireland is the fifth largest market for British exporters, accounts for 5% of our total exports abroad ...
every man, woman and child in Ireland spends on average £3,600 a year on British goods.
“That is how connected our economies are.”
The loan will be split into eight payments, with the first available to the Irish in September 2011 under a deal agreed with Dublin yesterday.
The interest rate on the first tranche would be approximately 5.9%, with each section of the loan on a seven-and-a-half year term.
The rate will be fixed for each tranche of the loan at 2.29 percentage points above the sterling seven-and-a-half year swap rate at the time.
Meanwhile, a massive €85bn bank and state loan facility was passed by the Irish parliament yesterday with the crucial support of independents.
Finance Minister Brian Lenihan said any suggestions that the Opposition could get a better interest rate from the International Monetary Fund was laughable.
The vote clears the way for €35bn (£30bn) to be set aside for the banks — €10bn (£8.7bn) being drawn right away — and €50bn (£44bn) for the state's running costs. The average interest rate is about 5.8%.
Michael Noonan, Fine Gael finance spokesman, branded the IMF/EU deal an obscenity, while Labour claimed it was bad for the country.