Ireland paid at least € 709m in interest to UK on bailout loan
Ireland has paid at least £ 610million (€ 709million) in interest on the 2011 bilateral bailout loan it secured from Britain, making it one of the loans UK’s most lucrative ‘risk-free’ ever granted to a sovereign government, thecan reveal.
It comes as Finance Minister Paschal Donohoe said today that the National Treasury Management Agency has made the final payment on the £ 3.2bn (€ 3.7bn) loan which was concluded as part of the global $ 67.5 billion international bailout the state needed in the aftermath of the devastating banking and real estate crash of more than a decade ago.
The loan was a separate bilateral loan but, unlike other smaller bilateral bailout loans Ireland has made with Denmark and Sweden, the UK government under an Act of Parliament did not authorize the prepayment of the loan, which would likely have reduced the cost of the interest payment bill to Ireland over time.
According tocalculations, which are based on an interim UK Treasury report released in October, Ireland will have paid Britain at least £ 610million in interest over the course of the loan – which is one of the best returns without risk that a sovereign government can do to another government.
Senior economist Jim Power said “there was no risk” for the UK to give the loan to another European government, and the interest bill for Ireland would have been less if the government had been authorized to repay it earlier.
The UK Treasury Interim Report showed that the UK changed and applied a lower interest rate than originally forecast in 2011 and represented the UK’s cost of funding based on its own return from gilt or d ‘obligations, as well as service charges.
The loan financing cost used by the UK was based on the yield or average interest rate of the UK bond issue during the six months preceding a series of loan disbursements.
The UK Treasury report notes that in 2017 the UK government agreed to Ireland prepaying its bailout loans the Irish government owed the IMF, Sweden and Denmark. But Britain’s waiver did not extend to the interset or the principal repayment of its £ 3.2 billion loan to Ireland.
Before Ireland’s final repayment, the amount the UK government received in interest payments in June last year had reached over £ 600million, according to the report.
Finance Minister Paschal Donohoe said he welcomed the final repayment of the UK bilateral loan today. “This repayment marks the completion of another step in our journey since the exit from the EU-IMF financial assistance program in December 2013,” he said.
He said Ireland did not request the prepayment of the UK bilateral loan because “as a fixed rate loan there were breakage costs associated with the prepayment which meant it was not not in Ireland’s economic interest to prepay the loan “.
The minister said Ireland made early repayments to the IMF until March 2015 and repaid the rest by the end of 2017.
He said Ireland had prepaid loans from Sweden, for 600 million euros, and Denmark, for 400 million euros in late 2017, in full.