Bailout will total more than the EU ever gave us
Noonan says interest rate must be renegotiated by next government
THE €85bn IMF-EU bailout will come to more than the total amount of payments received since we joined Europe in 1973, the Sunday Independent can reveal.
Fine Gael's Michael Noonan said yesterday that this stark fact showed why the interest rate levied on Ireland must be renegotiated and that any new government's hand will be strengthened by this revelation.
In cash terms, Ireland has received €63.7bn from Europe in various agricultural, social and cohesion funding -- far less than the bailout forced on the Irish by Jean Claude Trichet's European Central Bank in late November.
When those payments are adjusted for inflation, they total €99bn -- that is fractionally more than the total cost of the bailout when the penal interest rates are factored in.
When Ireland's payments to Europe are subtracted, our net receipts from the EU budget amount to €41bn, of which no more than about €20bn could be classified as in any sense discretionary.
In 1973, Ireland received funds totalling just €47.1m from the then EEC, but by 1984 that figure had shot up to more than €1bn a year.
Payments into Ireland peaked at €3.2bn in 1997 and 1998 and have been falling steadily ever since.
According to the latest figures available from the Department of Finance, in 2009 Ireland received €1.8bn from various European funds, with the bulk of the money coming from the European Agriculture Guarantee Fund.
The fact that all of the inward investment into Ireland since we joined the EEC will be negated by paying back the bailout fund highlights the horrific cost being borne by the taxpayer because of the mistakes of bankers and developers during the last decade.
Fine Gael's finance spokesman Michael Noonan told the Sunday Independent that Ireland will end up paying back more than it has ever received from Europe.
He said: "These figures strengthen the hand of any incoming government to renegotiate the rate of interest being levied on Ireland, particularly on the sum coming from the EU stability fund."
Mr Noonan was heavily critical of Brian Lenihan's decision not to contest the interest rate on the first tranche of loans totalling €5bn, which was transferred on Wednesday.
As Spain and Portugal seek to contain borrowing costs and avoid bailouts, European governments are considering lower interest rates on rescue loans in exchange for new guarantees to limit sovereign debt.
Ireland became the first nation to tap the fund, created in May, after Greece had received a separate €110bn rescue package.
The ratio of Irish debt to gross domestic product will reach 114 per cent next year, the EU estimates. That's up from 25 per cent in 2007.
"It would be reasonable to lower currently charged funding costs by some 200 basis points to 300 basis points, thereby providing additional indirect financial support," Julian Callow, chief European economist at Barclays Capital in London, said in a January 10 research report.
European finance ministers may discuss lower rates on rescue loans when they meet in Brussels tomorrow.
Other possible changes include boosting the lending capacity of the EFSF, which is backed by €440bn in guarantees by eurozone governments, and expanding its role to allow for debt purchases.
French Finance Minister Christine Lagarde has said that increasing the size of the fund by several hundred million euro will not be sufficient.
The EU must forge a "global package, not a series of individual parcels," she said.