The small print of the Irish bail-out should make anyone think. The main figure of importance is what the rate of interest will be, and it appears that the ECB is talking of asking Ireland to pay 7% for the monies it provides, which include 100 billion Euros already lent, to the 90 billion Euros bail-out. There is no way Ireland can afford to pay it.
Guardian blogs on the Irish interest rate – Numbers coming out of the City are that it will be somewhere above 6%, which economists say is unsustainable.
Last night government minister Batt O’Keefe did not deny the interest rate charged by the IMF/EFSF could be a punitive 7%.
Once the first default kicks in, other countries struggling with their debts will tumble like dominoes, and the numbers of countries in default will likely include many who are nothing to do with the EU.
The I.T. says there are many lenders interested in securely backed bonds in peripheral Euro countries paying 7%. That said, who an afford to pay that amount? If Ireland defaulted and reissued her own currency, she could probably borrow at half that rate. The bond-holders will have to accept a one-off loss. The Punt could find a level where Irish exports would blossom, and the recovery would be two years, not ten. And Ireland would start to regain her freedom and recover her sovereignty. That’s a win-win.
Defaults are going to come anyway since Germany insisted bond-holders must accept losses. Ireland might as well stop the save-the-Euro nonsense now, as far fewepeople will be hurt, the sooner the plug is pulled. Only Cowen’s cronies care about saving face and their wallets. Don’t worry about them. They’ve got plenty of money.