Government has paid £37m in interest to UK for bailout loan
Ireland granted rate cut as 'special case' thanks to economic ties with Britain
THE Government has so far paid £37m (€44m) in interest to the UK for loans given as part of Ireland's bailout.
This interest was accrued as part of the £3.2bn loan provided by the British Treasury to Ireland in 2010 as part of a €67.5bn international rescue deal.
When the bailout deal was announced, the UK, Denmark and Sweden agreed to make direct loans to Ireland as part of their bailout contribution. Euro-area countries make loans through the euro bailout fund.
The loan was disbursed in eight separate instalments of £403.37m, with £2.4bn drawn down thus far. The instalments have varying maturity dates, between six and seven years.
Chancellor George Osborne has already confirmed the UK has cut the interest rate on the 2011 loan, referring to Ireland as a "special case". Details were given last summer. Mr Osborne said it was in Britain's national interest.
Under this altered pricing arrangement, the UK charges Ireland 0.18pc above its own borrowing costs for the loans, based on the average yield on UK government debt in the six months before a loan is made. This new rate applies to all past and future loans.
Under the original structure, repayments were calculated by adding 2.29pc to a formula known as the 'sterling seven-and-a-half-year swap rate' – meaning an interest rate of 4.5pc.
The revised rate came into force last year. To adjust for the higher rates previously paid, the interest payment that was due on December 15 was reduced by £7.67m. The Treasury said it provided the loan in 2010 because it was in the national interest of the UK that Ireland has a "successful economy and a stable banking system".
"The links between our financial systems, particularly in Northern Ireland, mean that there is a strong economic case to provide financial assistance to Ireland," it added.
"By being part of the international financial package, the UK will indirectly support the very many businesses across the UK that trade with Ireland."