Current rates 'like World War One reparations'
Published 19/07/2011 | 05:00
Ireland's attempts to get interest rates on its bailout loans reduced were given a boost yesterday when influential US economist Larry Summers compared current rates to the reparations Germany faced after World War One.
Mr Summers, until recently the key economic adviser to President Barack Obama and a former treasury secretary under Bill Clinton, said rates charged by the "official sector'' -- the EU and IMF -- were similar to those imposed upon Germany after the war and written about at the time by economist John Maynard Keynes.
"Meeting debt burdens at rates currently charged by the official sector -- let alone the private sector -- would involve burdens on Greece, Ireland and Portugal comparable to the reparations burdens Keynes warned about,'' said Mr Summers, in a long essay written for the 'Financial Times'.
He is among a group of economists who have called on bondholders to take hits to allow Greece to stabilise its debt levels.
Mr Summers said yesterday that bondholders should have to face lower interest payments on their bonds and longer maturities. He said bonds could also be bought back on the open market at discounted prices.
The Government is hoping this Thursday's European council summit could involve a deal for Ireland via a wider European deal.