State could pay interest rate of 6.3%

PRESS CONFERENCE:THE STATE could pay up to 6.3 per cent interest on at least part of the €85 billion bailout announced yesterday.

The Government said the average rate that would apply to the €67.5 billion international contribution – the State is contributing €17.5 billion – to the bailout would be 5.8 per cent.

However, at a press conference representatives of the IMF, European Central Bank and the European Commission emphasised that the 5.8 per cent rate average applied only to the €45 billion European contribution and not to the IMF’s share.

They also said that it would be an average rate.

It is understood that some of the cash, the €22.5 billion that will come from the European Stabilisation Fund, will be charged at 6.3 per cent. Some of the loans will be charged at 3.1 per cent.

István Székely, the European Commission’s director of economic studies, would not say what other rates would apply to the loans beyond saying that they would be “public issues” and the interest would be known when the loans are issued.

He did not comment on suggestions that the State will pay up to 6.3 per cent. At the same time, the €22.5 billion that the IMF is contributing will be charged at a standard draw down rate, or SDR, but neither of the fund’s representatives, David Hawley and Adjal Chopra, would say what that was. That is a dollar rate, and is understood to be around 5.8 per cent.

Mr Chopra confirmed that the Government brought the €12 billion National Pension Reserve Fund “to the table” as part of its contribution to the overall bailout.

At least part of the fund, designed to provide for future State pension requirements, will be used to contribute to a €10 billion up-front contribution from the State that will be used to further recapitalise the banks.

The State will contribute €17.5 billion overall from the reserve fund and other cash resources There were mixed messages about the fund’s use, Mr Székely said that all its resources would hopefully not be required, while Mr Chopra said it should be taken as a positive sign the Government was in a position to bring it to the table.

There is no question that the senior bond holders, the European financial institutions to which Anglo Irish Bank owes €15 billion, would be asked to accept a discounted repayment.