Interest bill must be paid off first

LAST year the state paid €2.5bn in interest on debt it owed. Accepting an €85bn bailout — even if we are providing €17.5bn of the money from our own resources — means this interest repayment will rise dramatically in the next few years. But by how much exactly, and what effect will it have on services?

At their press conference announcing the details of the bailout, Taoiseach Brian Cowen and the secretary general of the Department of Finance, Kevin Cardiff, said it was difficult to indicate exactly how much Ireland would be facing in annual interest repayments.

For a start, they said Ireland might not draw down all of the money. Secondly, the interest rates being charged by each of the lenders involved would vary. Thirdly, they insisted that the bailout would represent savings because, if Ireland were to seek the money from the markets, it would come at interest rates of far in excess of the average 5.8% rate involved in the bailout.