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Ireland: 'A friend in need'

Nick Robinson | 21:08 UK time, Sunday, 21 November 2010

Britain has offered to make a direct bilateral loan to Ireland as well as contributing to EU and International Monetary Fund (IMF) loans. Government sources say that the government wants "to help a friend in need".

Ireland

Although final figures for the bail-out will not be agreed for several days, I understand that Britain expects to contribute £7bn or more in total.

The cost of the direct British loan to Ireland is expected to be "in the low billions". The UK will also contribute as a shareholder of the IMF and as a participant in the EU mechanism (as against the eurozone facility) agreed in May by the former Chancellor Alistair Darling.

All the funding will be in the form of contingency loans which the government expects to see paid back.

The chancellor is expected to make a statement in the Commons tomorrow. He is likely to face questions from Eurosceptics like John Redwood about why Britain has agreed to use any European mechanism at all.

Update 2203: John Redwood has just been on the BBC News channel expressing his concern:

"It's not something I'd recommended that we do, and obviously when we hear about it in the House tomorrow I'm sure many of us will want to know why, how much, how long are we out of the money, what are the prospects of being repaid, what is the interest rate? Of course this will be money we have to borrow ourselves, because we don't have any money. All the money we're spending on top of traditional programmes is borrowed."

Comments

  • Comment number 1.

    In such poor economical times, why should we become a charity to the Irish, after all arn't the Conservatives Euro sceptics??? Or is this just to get cosy within EU Parliament?

  • Comment number 2.

    It goes to show you how much external pressure was being exerted on Ireland that Ireland would agree to accept one penny from either the IMF or the UK.
    Where was that external pressure coming from?
    Likely the UK's great pal across the o'cean: the United States of America.
    Why?
    Because China had promissed/committed to buy any soveriegn bonds put on the market by any STUPID PIIGS. So come June, 2011, when the Irish bonds hit the market, China was going to grab them up, which have caused the United States to become apoplectic.

  • Comment number 3.

    Robbie Jones -

    "In such poor economical times, why should we become a charity to the Irish..."

    Most of UK exports go to Ireland - if they go under, who are you going to sell your stuff to?

    All this proves is that the £7 billion cuts in this country probably could have waited.

  • Comment number 4.

    Nick, you should have written that the British Government has offered to make a direct bilateral loan to Ireland ...

    The fact is that the British Government will itself have to borrow money in order to finance this bilateral loan as well as any loans made through the EU Loan Facility and any loans guaranteed by the IMF as a major contributor.

    This ultimately means that the British Taxpayer - and the way things have been going, Britain's childrens' children - will be paying interest on these loans taken out to lend to the Irish.

    European politicians are starting to exhibit the behaviour of scoundrels on their uppers - borrowing from Peter to pay Paul just so they can maintain the veneer of social democracy delivering a social safety net when logic and reality has revealed that the cost of maintaining the veneer, let alone the social safety net, has basically bankrupted every man, woman and child in the UK and probably all other Europeans for that matter.

  • Comment number 5.

    I believe people have to note that we export more to Ireland than the BRIC countries put together, therefore it is in our interest that Ireland is kept afloat.

    These loans are all expected to be repaid...it should pay off in the end

  • Comment number 6.

    It will be a British loan and repayment by the Irish will be demanded. There's very little charitable about this. This is blatantly a move to protect Britain's national interests. Every person in Ireland spends an average of £3,607 per year on British goods.

  • Comment number 7.

    This crises has been engineered by the Libertarians so that these predatory free-market anarchists can hoover up what remaining Irish state assets still exist (just as is happening in the UK). Assets which Irish taxpayers have taken generations to build up...

    http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8148882/US-firms-warn-Irish-over-tax-move.html

    ‘It seems the sale of some state assets will be included in the measures. These may include the government's 25pc stake in Aer Lingus, the national carrier, as well as its National Lottery licence and the country's separate gas and electricity boards.’

  • Comment number 8.

    Brian Cowen isn't called BIFFO for nothing!

  • Comment number 9.

    At the same time as we are offering this help Northern Foods is planning a merger with Greencore and moving the head office to Ireland to reduce the tax liability. The very tax that of course we need as a contribution towards this assistance for Ireland.

    Is this the first occasion that a Turkey has not only voted for an early Xmas but has volunteered to fund the festivities too?

  • Comment number 10.

    First off, I love Ireland and the Irish, I lived there for 2 years and really enjoyed it.

    But...

    The UK is broke,

    We can't afford our current size police
    We can't afford our current size armed forces
    We can't afford not to squeeze students for every penny they may earn in the future
    We can't afford to give newborns moeny for a fund to save for uni
    We can't afford to give pregnant mothers £150 to ensure they have fress fruit
    We can't afford universal child benifit
    We can't afford to fix schools in need of repair for decades

    In short, we are skint.

    So where is this 7 BILLION comming from?

    If we have 7 Billion lying around then why the heck are we making so many cuts? Ideology is the only anwser, which means Labour are right about the cuts after all.

    Either that or we are going to increase our deficit to help Ireland, which means that to keep to their target the government is going to have to find 7 BILLION of new cuts (as this loan is unlikely to be short term) so what is going to be cut to pay for Ireland?

    Either way the British are going to suffer 7Billion of cuts they don't need to help Ireland.

    It's not that I don't want to help, simple maths says we can't afford it!

    Either that or as mentioned allready, labour are right, and it's all Ideological and the tories are rubbing their hands at the thought of what they can now chop!

  • Comment number 11.

    By a friend in need Nick I assume you mean RBS and LLoyds.

    This money is being provided to prop up the Irish banks who were lent so much money by the UK banks (and German, French and US banks).

    So this is more money being paid to help out banks that are still proposing to pay out billios in bonuses.

  • Comment number 12.

    The REAL story here Nick is that the government is prepared to suffer the inevitable political damage to make the loans to the Irish government to bail out the Irish banks who owe about £42 billion to UK banks (particularly RBS and LLoyds).

    I suspect what that really tells us is just how vulnerable RBS and LLoyds are.

  • Comment number 13.

    #10 laughingdevil:

    A one-off loan of £7 billion is peanuts compared to all of the other financial commitments the UK government has. The 2008 bank bailouts was a one-off investment of £80 billion. The spending cuts by 2014 are about £81 billion PER YEAR. We will have to borrow ourselves to make this loan, but even if the interest rate for us is something ridiculous like 10%, that's still only £700 million per year which is nothing compared to the size of the deficit.

    If the Irish economy collapses completely, I'd guess we'd lose a lot more than £700 million per year from loss of exports to Ireland. #6 OsisMurhpy hit the nail on the head: this is very little to do with goodwill and a lot to do with protecting our own economy.

  • Comment number 14.

    How is it that we can afford to borrow money to bailout Ireland and the Euro but we cannot borrow money to fund our own navy?????

  • Comment number 15.

    Given the inextricable link between the two economies and the disaster for all concerned if Ireland goes down the toilet, I am reminded of a quote from FDR, I think (though I heard it on "The West Wing"):

    "If your neighbour's house is on fire, you don't haggle over the price of the hose."

  • Comment number 16.

    #10 laughingdevil

    No,we didnt find 7 billion down the back of the sofa,nor have we got it
    squirrelled away in a bank marked "A friend in need account".

    We do though sell a lot of exports to Ireland so we will borrow 7 billion
    and then "lend" it to Ireland so that they can continue buying stuff from
    us.

    Thats the logic anyway but I dont like this bizarre arrangement any more
    than you do.

    Its got nowt to do with the cuts that will befall us,there really is no
    money left thanks to the bankers and the previous governments frenzied
    spending spree.

    About the only sensible thing that Gordon Brown did was to keep us out of
    the Euro,and even then that was because Blair was keen to jump in with
    both feet.If Blair had been anti Brown would have insisted that we join
    just to be contrary.

  • Comment number 17.

    There is something very very wrong about the chancellor and PM making promises like this without it first being debated in parliament so we can then at least all see what the terms and conditions are ....

    The amounts they are talking about are astronomical and virtually the same as the cuts we are already having to make, there is something they arent telling us and we need a proper reasoned debate about the whole thing.....

  • Comment number 18.

    As one might expect, the vast majority of English commentators are unashamedly hostile to the notion of Britain having anything to do with protecting and sustaining our Irish cousins through their difficulties. Shame on them. Yes, the Irish may be arrogant, perhaps even supercilious at times, but they are our very dear friends and neighbours. Should one wish to forego the moral, ethical and sentimental reasons for intervening, as much of the hard-line right in the UK, and the shameless Anglocentric, pessimistic and petty narrow prejudiced public opinion would have us believe, then the Irish Economy deserves to fail as we tut-tut on the side-lines - and yes, as the nasty righties spit, so they say it deserves to do. The responsible, grown-up, rational and measured participants and observers understand full-well the reality of our situation, and are emphatic in our desire to achieve a rescue package that perhaps Irish arrogance will resist for a time, and we shall wait for a semblance of foresight and intelligence to replace, and at some point we shall come to a position in which the UK is a major and key enabler in the package to rescue the Irish economy that should proceed in the national interest going forward

  • Comment number 19.

    This is an interesting development.Firstly it must come as a real shock to Ireland who has enjoyed her independence from us for 90 odd years and now finds her economic sovereignty under question. As to our potential aid for them I am in agreement with notayesmanseconomics.
    "As regards aid to Ireland then there might develop quite reasonable grounds for the UK to help out and I wish to repeat I wish Ireland well. But at the moment it looks as though we in the UK are offering the Euro a type of implicit bailout and this involves a large moral hazard. This particular moral hazard involves politicians and officials in the Euro zone who have boasted and boasted about their “shock and awe” package."
    He goes on to wonder where all our friends were in 1992 when they rather conspicuously failed to help us...
    http://notayesmanseconomics.wordpress.com

  • Comment number 20.

    It is probably right that we should advance a loan to help a neighbour and important trading partner, but it should be with the proviso that the Irish have to dispense with the 12.5% corporation tax rate designed to suck tax revenues out of other countries, which is causing considerable pain to the UK. Ireland cannot act like an irresponsible tax haven and then expect to be bailed out.

  • Comment number 21.

    Nothing to do with George Osborne being the heir apparent to the Osborne Baronetcy of Ballentaylor and Ballylemon in County Wexford, I don't suppose.

    Of course, Osborne's love for all things Irish is well-documented, he wrote a Times article explaining how he looks up to them and how we should emulate them:

    http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article733821.ece

  • Comment number 22.

    Who are they trying to kid with this "friend in need" line? British banks have invested heavily in the Irish economy and it's pure self-interest forcing the hand here.

  • Comment number 23.

    Why can't we take these "loans" out of the foreign aid budget? It would at least allow us to see where our aid money goes, just across the Irish Sea, and not ending up in some dictators Swiss bank account. And we have pots of money available for foreign aid. It is even ring-fenced.

  • Comment number 24.

    A clever sleight of hand. UK (as well as German, French and US) banks have massive exposure in Ireland. Not content with making the Irish state insolvent, these revolting ticks now demand loans be made to the Irish government to support their addiction to profit. Their bonuses for this year are secure, paid for by another bank bailout - and they don't even get the blame this time, "It's the fault of the Irish". I suspect we've seen the camel's nose years back, the head is following. Time to let this house of cards fall - we'll survive somehow and work out a better way.

  • Comment number 25.

    We can see how its perfectly acceptable to slash spending on essential public services...because we are told there is no money left and there is no other way. The most vulnerable and those on low incomes disproportionately affected and facing years of even greater austerity because of govt cutbacks. Of course when it comes to continuing to prop up failed financial institutions/systems....out comes the chequebook without hesitation. And of course in turn this will facilitate hugely excessive banking bonuses and protect future tory voters/donors and fellow elitist club members while everyone else pays again for it all, especially those who can least afford it.

  • Comment number 26.

    So, does this mean that the Irish will have to raise their corporation tax in line with EU norms or are we just funding their ability to poach businesses from the UK? The likes of Google and Dell aren't based there because they love Guiness, James Joyce and over-valued property.

  • Comment number 27.

    Well, some of you appear to understand the situation at least... (Mendemus, 7SG, Chris)... some of the rest of you though, are just plain dangerous.

    This ones got a lot,lot longer to run yet. We haven't seen the half of it yet.

  • Comment number 28.

    Lefty 11

    I am not happy to bail out a failed Irish bank who made bad loans either but as our trade is so intertwined with theirs we have little option. If we let the economy fail completely who will bridge the trading gap left by them? Also our crippled and corrupt banks RBS and Lloyds have massive exposure to Allied Irish Bank so we would be in the position of having to bail them out all over again or let them fail. If we let them fail anyone with money in banks anywhere would lose it all, including our pension funds, mortgages etc. Domino effect and a sign that all our leaders and economists etc took their eyes off the ball for the last 10 years.

    As to the bonuses these massive institutions seem to be holding our governments to ransom by saying they will move countries if they are not allowed to continue their ponzi schemes and pay ridiculous bonuses or if they feel they are being punitively taxed. Unfortunately it is in our interest that they get back to being profitable so we are in a catch 22 position.

  • Comment number 29.

    Figures show that the UK spending on foreign aid - including the amount spent by departments other than DFID - will rise by 50 per cent, increasing from £8.4billion this year (2010) to £12.6billion in 2014.

    Presumably, the aid to the Republic of Eire will be taken from this budget?

  • Comment number 30.

    Ireland have deliberately set very low rates of corporation tax to attract business there from all over Europe. Many UK companies have done just that relocated their legal entities to Dublin which has meant significant loss to HMRC - now they want more of our money, I hope there are clauses in place to make them increase corporation tax.

  • Comment number 31.

    I think the one thing this shows is what happens when you live beyond your means for too long and also the precarious position the UK could very easily be in. I still hear deficit deniers talking about whether we need to have cuts and why not just borrow the money and 'invest' it in pensions, welfare payments, etc.
    I think those on the EU gravy train must be in the middle of a very slow derailing at the minute - I can see the Eurosceptics becoming very powerful over the next decade.
    And another thing for sure - the banks will be forced to pay for their greed at some point.

  • Comment number 32.

    #21 Disco

    Great research, a delicious find. However, I do agree with his points - Ireland has invested in good education, a high-tech industry and low business rates. Unfortunately it massively overspent on all other areas of state before this money had actually arrived.
    If they get through this hiccup and slim down their spending, I can see them being well placed for the future.

  • Comment number 33.


    The Irish crisis is a red flag issue for so many reasons:Through UK banks and exports,the domino effect on Portugal and Spain if Ireland defaults,and a test of deflationary economics as a solution to economic crises.

    The first two issues have been widely discussed,although British exports to Ireland are exaggerated at 6% of the total.Deflationary economics has received less attention,partly because the emerging EU consensus, led by Germany, is to cut debt and deficit as the best way to resolve the crisis.

    This is questionable.Taking both Greece and Ireland as test cases,rises in taxes and cuts in public spending has reduced growth and increased unemployment to the extent that revenue has fallen faster than debt and deficits have increased.In Ireland the deficit is now 32% of GDP!

    Deflationary economics are also a test case for Britain for reasons similar to Greece and Ireland.Increases in government spending plus monetary measures have produced growth this year,the question is will it last once cuts begin to bite? We don`t know,my estimate is that at best we will have weak growth for several years with decreasing revenues making debt reduction harder.

    With deflationary economics,politics and ideology have become fatally intertwined.Cutting back the state is intended to give greater scope to private capital.But the crisis was caused by a collapse in private capital who are now protected by their political representatives while the citizen pays the bills.

  • Comment number 34.

    Anyone who thinks that the EU and UK are acting out of concern for our Irish cousins are kidding themselves. Ireland was one of the first governments to carry out austerity measures but this policy of severely restricting public spending has done nothing to help Ireland's banking sector. Yet again the financial services sector is requiring a bail out from the public purse in order to make up for its shortfall. Only this time the banks belong to another country so why are we bailing them out? Could it possibly be because our own banking sector stands to lose a massive amount of money that is currently tied up in the Irish banks insolvent accounts? Once again we are throwing money away trying to rewrite the rules of the market. Will these measures help Ireland in the long run or are we just storing up another crisis for later?

  • Comment number 35.

    Ireland, like the UK, has been brought low by feckless behaviour in the banking sector, emphasising yet again how we really must get a grip on these guys. A firm one. Round the neck, preferably. It's galling, to be sure, having to stump up money (both via the EU and bilateraly) to bail out Ireland, but it's necessary. If Labour were doing it, I'd support it and thus I support it in this case. Non-tribalism is the new black. I expect the same from all the tory bloggers on here who would have been dead against doing this if Brown was the one doing it. Let's hear your condemnations of Osborne, please. If we don't hear them, we'll know exactly what you are. Let's also hear less of we "can't afford" our welfare bill and other such reactionary nonsense refrains. That we can do this nice thing for Ireland shows we're not on our uppers, far from it, and it kills off any credibility for the notion that the tories are slashing public spending in the name of sensible deficit reduction rather than just for the sake of it.

  • Comment number 36.

    Having listened to the whole of the Today programme today, I can only say that there is nothing in Nick Robinson's original post that is news or insightful, BUT

    Posts #2, #12, and #21 are very interesting indeed.

    #2 - it is well known that China is interested in keeping the value of the Euro high (Dear Premier went to Greece last month to reassure it), and it can be similarly argued that they actually want the bail out of Ireland just as much as the USA, because then the Euro will remain high only then. Nonetheless, it is an interesting political idea that the USA might not want China to switch more of their reserves from US Dollars to Euros. Interesting idea, but I can't see, in all my imagination of devious outcomes, how this would be....

    #12 Irish banks owe UK Banks RBS Natwest and Lloyds Hbos £42 billion, do they? As much as that? FORTY TWO billion pounds???? Gosh, that's almost enough to run the NHS for a year...

    #21 Now truly, that is a find! I like George Osborne, but true political analysis does involve looking back at HIS learning curve. He has undoubtedly learned a lot and changed his mind completely since the July 2007 International Credit Crunch (it took another year for Lehman Brothers to collapse, but actually this crunch started in July 2007 and was reported on widely in the Business news. In this day and age of instant electronic communications, it took that long for people to understand what was wrong with the Global Financial System? Let's get this straight..., nobody is that stupid, and especially when there are more than 7 billion people in the world, there must have been at least ten thousand who understand even BEFORE July 2007 that the whole thing was about to crash.)

    I'm not sure that politics and economics are two disciplines that can either be left apart nor allowed to mix, from what I have observed of all this in the last few years.

  • Comment number 37.

    More of our money into the banking black hole. No doubt this will ensure more 7-figure bonuses for those corrupt thieving b_stards in the city while the rest of us struggle to make ends meet. It's not even real money any more anyway, why not just make it 700 gazillion and be done with it?

  • Comment number 38.

    28#

    Para1, highly accurate reading of it, but it doesnt fit the (his) agenda.

  • Comment number 39.

    Technically what has been announced is a loan facility rather than a loan, and we don't know how much will actually drawn down, or in what order. To some extent it replaces, or complements, the emergency funding provided by the ECB.

    This is not merely a pedantic point. The British media consistently misrepresented the cost of the British banking bailout as it added emergency liquidity measures and guarantees to the direct cost of the banking recapitalisation to derive a very large number, which of course was never called upon.

    I would have thought that a peforming loan to Ireland would be classed as an asset and would not increase the UK's debt (but I may be wrong).

    A loan, yet alone a loan facility, cannot be equated to direct expenditure, as a number of contributors above have erroneously tried to do.

  • Comment number 40.

    "If Labour were doing it, I'd support it and thus I support it in this case."

    You know mate, you could have cut out all the rest of the "God, do I like the sound of my own voice" twaddle that pads out the rest of your post and just left it at this. That would have been a perfectly fine way of us understanding what you thought.

    "Non-tribalism is the new black." So, why are you still wearing Red?

  • Comment number 41.

    #12 Irish banks owe UK Banks RBS Natwest and Lloyds Hbos £42 billion, do they? As much as that? FORTY TWO billion pounds???? Gosh, that's almost enough to run the NHS for a year...


    You might want to stick another zero on the end of that, if you're looking at the true amount of money the NHS could swallow in a year, mate....

  • Comment number 42.

    Further to the action being correct and necessary (35) - it is, but the hostile comments of John Redwood are worrying as regards the politics. The antipathy of many Conservatives to all things Euro means they'd love to see it collapse. With actions such as this - which support the European model - Osborne risks real trouble in the ranks. Could get very nasty indeed if he's not careful. I hope not but it's very possible. Civil war in the tory party ... nobody wants to see that.

 

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