Ireland could pay 6.7 percent interest on bailout: report

November 27, 2010 | 20:47

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Ireland could be charged a 6.7 per cent interest rate on its emergency loans from the EU and the IMF, state broadcaster RTE said Friday.

The nine-year loan of 85 billion euros ($114 billion ) is to help Ireland bring down its massive budget deficit.

RTE said the figure compares to an average borrowing rate of 4.5 per cent on funds raised by the country's National Treasury Management Agency (NTMA) over the past two years.

It would be significantly higher than the 5.2 per cent rate charged to Greece for its separate bailout fund, said the broadcaster.

Michael Noonan, finance spokesman for the Fine Gael main opposition party, described the report as "very disturbing".

"This rate is far too high and is unaffordable on any reasonable projection of growth.

"Even though the government is in its last days in office, it must not abandon the national interest and settle on unaffordable terms in its negotiations," Noonan said.

But The Irish Times newspaper, citing a source involved in the talks, said the interest rate would be lower than the 6.7 per cent figure.

The source said the rate was still under negotiation but would not be that high, although it would be above the 5.2 per cent charged to Athens as the Greek loan was only for three years.

The nine-year loan being negotiated by Ireland would involve a higher interest rate, as the risk of default on a longer loan was considered to be higher, the broadsheet said.

The Irish Times said it understood the rate on the International Monetary Fund loan would be around 4.5 per cent, with the European Union portion attracting a much higher rate.

It also reported that officials in the EU-IMF mission to Dublin were examining how senior bondholders could be compelled to pay some of the cost of rescuing Ireland's banks.

AFP

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