Cowen govt receives 85bn euro bailout

The International Monetary Fund and the European Union have approved an 85 billion euro rescue package for the 26 County state at an average interest rate of 5.83 per cent.

The loann will require the contribution of 17.5 billion euro from the 26-County Pension Reserve Fund, as well as Dublin's other remaining cash assets, amounting to five billion euro.

Of the total sum, 10 billion euro will be used to recapitalise the banks, with a 25 billion euro 'contingency fund', and the remaining 50 billion euro will be available for the day-to-day spending by the Dublin government.

As part of the deal, the government has been given an extra year - until 2015 - to meet the EU requirement of reducing its budgetary deficit to 3 per cent.

The loan announced today will come equally from the European Financial Stability Mechanism, the IMF, and the European Financial Stability Fund.

The IMF's normal conditions and requirements for international loans will apply to the entire bailout fund.

In a statement this evening the government said the relatively high interest rate to be paid "will vary" according to timing and the market conditions in place when the funds are drawn down.

Taoiseach Brian Cowen said under the terms of the deal there would be no change to the country's 12.5 per cent corporation tax rate.

Cowen said the government had "carefully considered all available policy options" and had taken advice from the Governor of the Central Bank Patrick Honohan.

He said the loans were necessary to allow the Government meet its obligations and provided funds available at cheaper rates than those available from the market.

It also emerged this evening that the international capital funds which bought bonds issued by Irish banks will continue to be repaid in full and with interest.

In a statement issued before tonight's announcement, Sinn Fein President Gerry Adams said the government had no mandate to incur such a burden on ordinary taxpayers and called on them to cease negotiations with the EU/IMF, suspend the budget and call a general election.

"The bondholders must be burnt," said Mr Adams.

"There is a growing acceptance amongst economic commentators that the bondholders must take some of the pain and that the Irish people cannot be saddled with such a burden."

He said the government could not be trusted in any negotiations with the EU and IMF.

"They have no mandate to negotiate such terms and impose such a burden on ordinary Irish taxpayers.

"The result in the Donegal South West by-election has demonstrated clearly that people reject the government's four-year plan, its proposed austerity budget and IMF interference in Ireland."

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