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Irish protest – sort of – as bailout details emerge

The Irish government says a $112.5 billion bailout will come with a 5.8 percent interest rate. The public appears unhappy with the bailout, but uncertain where to direct its anger.

By Correspondent / November 29, 2010

A woman walks past a newspaper flyer reporting on the government bailout in Dublin, Ireland on Nov. 29.

Cathal McNaughton/Reuters

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Dublin, Ireland

Details emerged Sunday of the joint European Central Bank and International Monetary Fund plan to prop-up Ireland’s economy in an effort to keep the euro afloat.

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The package, designed to shore up the country’s nationalized banks, totals €85 billion ($112.5 billion) and will require Ireland to repay the money at an average interest rate of 5.8 percent over the next seven and a half years.

The plan includes €10 billion for recapitalization of the banks, a further €25 billion to held for banking contingencies, and €50 billion to run the county’s public finances.

Prime Minister Brian Cowen, leader of the Fianna Fáil party, said it was the “best deal available” to the country. But opposition figures reacted to the terms of the deal with dismay.

Michael Noonan, the finance spokesperson for main opposition party Fine Gael, said the deal was “a hugely disappointing result for the country." Labor party finance spokesperson Joan Burton said the country was “banjaxed” – Irish slang for "ruined."

Gerry Adams, leader of Sinn Féin, also described it as a bad deal. “The decision to protect bondholders is disgraceful. The costs of this deal to ordinary people will result in hugely damaging cuts,” he said.

Interest rate objections

The principal objections are to the interest rate imposed as part of the deal.

Irish Finance Minister Brian Lenihan defended the 5.8 percent rate as fair, saying that it was equivalent to the 4.5 percent interest rate imposed on Greece for its bailout in the spring. Ireland must pay a higher rate, according to the government, because its loan extends four and a half years longer than Greece's three-year loan, which means the Irish government will be paying yearly interest on a smaller amount of debt.

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