Sunday 23 July 2017

Taxpayer to stump up €3m extra a year over Greece crisis

Latest NTMA €1.5bn bonds cost extra 0.2pc over March issue

Brendan Keenan

Brendan Keenan

TAXPAYERS will have to pay more than €3m a year extra interest on money borrowed yesterday, compared with last month, as the Greek debt crisis sends interest rates higher.

The National Treasury Management Agency (NTMA) had to offer around 0.2pc more than in March when it auctioned €1.5bn in government bonds to banks and financial funds.

Bids for the bonds were more subdued, with three times as much funding being offered by investors, compared with more than four times last month.

Nevertheless, the sale was described as "solid" on a day when Greek interest rates hit new record highs and markets prepared for a rescue package and restructuring of Greek debt.

The International Monetary Fund (IMF), which is due to take part in any Greek package, said yesterday that government deficits were now the biggest threat to the global economy.

Its twice-yearly global-stability report said government demand for credit could crowd out the private sector, while higher interest rates would do further damage to bank balance sheets.

Yesterday was also the first NTMA auction since details of Ireland's €32bn bank recapitalisation were announced.

Alan McQuaid, chief economist at Bloxham Stockbrokers, said the auction was a "very solid" result in such circumstances.

"We continue to believe that international investors recognise the tough decisions Ireland has made as regards tackling its economic and financial problems," he said.

Rescue

Greece yesterday had to offer the same interest rate for three-month loans as the NTMA did for six-year bonds.

Athens' Public Debt Management Agency paid 3.65pc on 13-week notes -- more than double the 1.67pc it paid on similar loans in January.

The average yield on €750m of NTMA six-year bonds was 3.663pc, up from 3.479pc last month. A similar amount of 10-year debt was auctioned at a yield of 4.688pc, compared with 4.426pc in March.

Longer-term interest rates on 10-year Greek bonds jumped more than a third of a percentage point to a record 7.84pc, as data showed unemployment rose to 11.3pc in January, the highest level seen in six years.

Negotiations with the IMF, the EU Commission and the European Central Bank on a loan from the proposed rescue fund are due to start today.

Greek finance minister George Papaconstantinou said that if his country did activate the rescue package of up to €30bn from its eurozone partners, the loans would start arriving within one to three weeks.

"We will not be left high and dry," he added.

Irish Independent

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