Further to yesterday’s information contained in the EU press release, I found some additional details that may be of interest to readers:
- The EUR 10 billion capital injection will raise core tier 1 ratios to at least 12%.
- The Irish National Pension Reserve Fund will provide EUR 12.5 billion.
- Any banks whose core tier 1 is seen falling below 10.5% will receive additional capital through a EUR 25 billion contingent capital facility established through the program. The stress tests will include a third party review of asset quality to garner additional credibility.
- Liability management of subordinated bank debt will be "more widely applied" than just Anglo-Irish bank.
- A special distressed banking law will be introduced in 2011 for the small 'credit unions' sector
- The 5.8% interest rate is an average since the maturity of loan will range from 4 ½ years to 10 years.
- Ireland will have an extra 12 months, i.e. until 2015, to lower its deficit down to 3%.
- Ireland will discontinue its financial assistance to the EU loan to Greece.
The Irish contribution coming out the INPRF represents 50% of its total assets: as noted yesterday it is a disgrace. I do not understand how Ireland accepted this.
Still, this agreement has to be accepted by the Irish Parliament; the vote should be passed successfully despite only 2 seats majority (2 independents).
The new loan participation breakdown for any new EU rescue is:
Belgium | 3.64% |
Germany | 28.43% |
Ireland | |
Greece | |
Spain | 12.47% |
France | 21.35% |
Italy | 18.76% |
Cyprus | 0.06% |
Luxembourg | 0.26% |
Malta | 0.09% |
Netherlands | 5.99% |
Austria | 2.91% |
Portugal | 2.63% |
Slovenia | 0.49% |
Slovakia | 1.04% |
Finland | 1.88% |
France and Germany bear 50% of the total burden: unsustainable, at least for French finances if its AAA rating is to be retained (necessary for the EU lending vehicle to be AAA rated); I have therefore difficulties to see how the EUR 750 billion package decided in May could be raised in its entirety. My conclusion is that European countries cannot afford a Spanish bailout.
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Deutsche Bank: Thoughts on Ireland's aid programme
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