UK Chancellor: “Making the loan has enabled us to set that condition and to be part of the discussion…”

As the UK’s Loans to Ireland Bill passes on to the House of Lords for a second reading – debate here – the BBC’s Robert Peston notes that

The interest rate on the £3.25bn being made available in eight lumps over the next three years will be 2.29% above the cost for the British government of borrowing for seven and a half years.

Which means that a profit is more or less guaranteed for Britain.

George Osborne today estimated that profit at £440m in fees and interest over the 10 years until we get all our money back.

And, as the Irish Times reports, there are conditions attached

British chancellor of the exchequer George Osborne said the loan agreement struck with the Department of Finance in Dublin just hours before the legislation came before the Commons contains the “crucial condition” that “no amendments to the restructuring plan that would have a material adverse financial impact on the UK operations” of the three banks will be made.

“Given the scale of those banks’ operations in the UK, that second condition is significant, and it shows in a practical way why I believe it was right for us to provide the loan.

“It allows us to have a say in a restructuring plan that could otherwise have had a major impact on the UK and its banking system, and could potentially have cost the British taxpayer considerable sums of money without our voice even being heard.

“Making the loan has enabled us to set that condition and to be part of the discussion about the restructuring plan and its impact on the UK subsidiaries of banks which have significant presences in Northern Ireland.  [added emphasis]

“I know that there is concern about the potential impact of the plan on jobs and the availability of credit in Northern Ireland, and, indeed, about its potential impact throughout the UK, given that Bank of Ireland owns the Post Office card account,” said the chancellor.

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  • Mack

    Sounds like an incredible deal for the British banks, and by extension the British exchequer (presuming they would have to bail them out again, under any Irish banking debt restructuring)…

  • Mack

    Eddie Hobbs arguing Ireland should be looking for finance from other sources..

    Get a gun

    You can achieve more with a nice smile and a gun than just a smile. Ireland should explore refinancing elsewhere through bilateral loans from non-EU sources like the Chinese Government, who may be seeking an economic base for expansion into Europe. If we have to threaten to bring down the house of cards that is the unreformed Eurozone and, with it the EU, then we must be prepared to do so.

    http://eddiehobbs.com/_blog/EddiesBlog/post/THE_IRISH_ATTEMPT_TO_TAX_OUR_WAY_OUT_ENDED_IN_DISASTER/

  • Mack

    Mike Shedlock’s latest offering very good too, we are running out of time.

    One thing I am sure of is the crisis won’t wait until 2013.

    Frank-Walter Steinmeier and Peer Steinbrück, former German foreign minister and former German minister of finance respectively, came up with a multi-point proposal that could conceivably work. ..

    That’s the good news. The bad news is the Steinmeier-Steinbrück plan would require agreements on haircuts, debt guarantees, E-bonds, fiscal policies, and debt rescues.

    Read more: http://www.businessinsider.com/european-leaders-debt-crisis-2013-2010-12#ixzz18HvmjgWn

  • another

    And what does the loan do but play into the hands of Sinn Fein, who simply have to offer the electorate a Russian style default (three years hard pain and recovery); and a guarantee that they will default on the British and all other loans.

    Just look at the rate the Germans are able to borrow at, vis a vis the rate that is bing charged to the Irish…it is simply a disgrace.

    Nic Lenoir On Why The Euro Is About To Crash And Burn, And Why His Concern For The “New Normal” Is Not Slow Growth But Civil War:

    http://url.ie/8hyw

  • Mack

    @Another

    The rate being charged to the Irish is high to take account of the fact that the probability of default is high. It’s pretty clear from the terms of this loan that the British government would prefer sovereign debt rather than bank debt to be restructured (that would probably include this loan)..

    There are no simple solutions to this.

    Rather than being picked off one by the one the PIIGS should form an alliance to push for the EU wide changes required to sort out the euro crisis on terms that do not completely destroy their economies and the social fabric of their nations – while also avoiding outright collapse of the European financial system, euro etc, and creating confidence in Germany that the PIIGS will be subject to better economic management in the future..

  • pippakin

    Ireland flattered itself it had great negotiators, so sharp you had to count your fingers after shaking hands with them. We have found out the hard way that not only were the negotiators no good they were absolutely bloody appalling.

    Of course The British and the Europeans went for the best deal they could get, why didn’t we? We were in a strong position!

    Old saying: if you owe the bank a couple of thousand the bank owns you. If you owe the bank millions you own the bank. Its a pity the Irish negotiators in their panic didn’t stop to realise they had the euro and the pound depending on them.

  • Alias

    It’s revealing that the only aspect of this sell-out of the Irish nation by its quisling political class that said quisling political class want to negotiate is the rate of interest to be paid on funds borrowed to bail-out foreign bondholders, having accepted the principle that Irish taxpayers should donate the bulk of their incomes to bailing-out said bondholders. Therefore none of that treacherous class are opposed to the bail-out.

  • Alias

    “You can achieve more with a nice smile and a gun than just a smile. Ireland should explore refinancing elsewhere through bilateral loans from non-EU sources like the Chinese Government, who may be seeking an economic base for expansion into Europe. If we have to threaten to bring down the house of cards that is the unreformed Eurozone and, with it the EU, then we must be prepared to do so.”

    Ah yes… sell Ireland to the Chinese rather than the Europeans.

    Obviously Hobbs doesn’t understand what collateral is or that the ECB has legal title to circa 186 billion worth of bank assets as collateral for the loans it has advanced to the Central Bank to prop-up the eurosystem via the marginal lending facility.

    If you default to the ECB then your banks lose their prime assets. So there is now no possibility of Irish taxpayers avoiding repayment via default of the 186 billion worth that has already been squandered to bail-out bondholders.

    Likewise, just as the ECB is the currency’s lender of last resort so too is the IMF the state’s lender of last resort, so defaulting to the IMF isn’t an option if the government wants anyone to lend to it.

    The EU has locked the Irish into perpetual debt servitude with the collusion of a quisling Europhile political class and deeply naive voting class and there is no way out now.

    He also hasn’t noticed that China is the next boom-to-bust candidate….

  • Alias

    One other point: the ECB also holds Ireland’s foreign reserves, which were transferred to it when Ireland joined the EuroZone, so don’t bother asking for those back if you plan to default and use them to reluanch the punt – you won’t be getting them back.

  • Alias

    Incidentally, if the repayments on the IMF/EU loan is 20% of tax revenue, then repayment of the ECB loan of 186 billion will be circa another 40% of tax revenue, add in another 20% of state funds already squandered on bailing-out the eurosystem and then 20% of the toxic debts stalled in NAMA and you’re already at 100% of tax revenue going toward bailing-out the eurosystem. And for those sweets souls who think debt just goes away or is forgiven by kind hearts, I refer you to the African nations.

  • Barnshee

    “Old saying: if you owe the bank a couple of thousand the bank owns you. If you owe the bank millions you own the bank. Its a pity the Irish negotiators in their panic didn’t stop to realise they had the euro and the pound depending on them.”

    Shakes head– a rain soaked hole on the edge of europe population a few mil 48th position GDP versus UK pop 50Mil + 6th position GDP “and the pound depending on them”

  • Mack

    Ah yes Barnshee, but 5% of British GDP is invested in Irish banks!!