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Ireland exits bailout of €85bn

Three years after being saved from bankruptcy, Ireland will exit the Eurozone bailout programme on 15th December 2013.

The Troika programme

A three-party committee led by the European Commission, the European Central Bank and the International Monetary Fund was organised loans to Greece, Portugal, Ireland and Cyprus.

Of all the four counties that have benefited from the bailout due to the Eurozone crisis, Ireland will be the first country to exit from the bailout programme.

The price of bailout

Ireland cut spending and raised taxes to balance the economy after seeking bailout in 2010.

The government earned €28bn through budget cuts and increases in tax over the last three years. Taxes were hiked to €5.3bn and a cumulative spending cut was €9.6bn.

Ireland’s cost to borrow money has now fallen to 3.5% from the earlier 15%.

Ireland invested about €64bn into the banking system during the crisis – equivalent to 40% of the gross domestic product (GDP).  Income of €4.2bn has been generated by the bank guarantee for the Exchequer. €2.3bn has been repaid in 2013 following the sale of the Bank of Ireland CoCos (Convertible Contingent Capital), the successful sale of Irish Life and the redemption of the preference shares to the State by Bank of Ireland.

Future of the bailout

Ireland’s ability to exit the bailout has been driven by a focus on managing public finances, restructuring the banking and financial system and focusing on jobs and growth enhancing strategies.

“This isn’t the end of the road. This is a significant milestone on the road,” said Michael Noonan, the minister of finance, said at a press conference.

Before the bailout, about 7,000 jobs were being lost every month. Over the last year, the Irish economy has created 58,000 new jobs. The unemployment rate is now 12.5%. Public sector wages have dipped by 5%.

The current level of debt is 124% of the GDP is above the European average of 94%.

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How is Britain going to suffer from the Irish bailout?

The UK is not obliged to contribute, but decided to offer support amounting to the equivalent of £300 per household because of the close trading relationship with Dublin.

Speaking to The Telegraph, former Conservative Cabinet minister John Redwood said that European Central Bank should be responsible for ensuring Ireland remains solvent and claimed the burden should not fall on Britain’s shoulders because we are not part of the Euro single currency.

Mr Redwood, who is co-chairman of the Conservative Policy Review Group on economic competitiveness, told Channel 4 News: “I don’t think this is Britain’s problem; I think it’s a Euro area problem. Ireland is part of the Euro because it wanted to be. It is the duty of the European Central Bank to make sure that their banks are solvent and liquid.”

Impact of the bailout on Britain

Sam Bowman, head of research at Adam Smith Institute, the free market think tank said that the Government’s decision to offer around £7 billion in aid, including direct loans, to Dublin, was a “bad deal” for Britain.

George Osborne, the Chancellor of the Exchequer of the United Kingdom confirmed that Britain would provide an international rescue package of around £7bn to support Ireland.

“What we have committed to do is to obviously be partners as shareholders in the IMF in an international rescue of the Irish economy,” Osborne told BBC Radio 4’s Today programme. “But we have also made a commitment to consider a bilateral loan that reflects the fact we are not part of the euro but Ireland is our very closest economic neighbour.”

UK anger

Twitter users from the UK have condemned the governments decision to provide a financial bailout to Ireland. AnnJ says “Is the UK so rich that it can afford to bailout Ireland?” JohnnyLee5 says, “We cannot take this lying down. The government should not be so generous.”

Ireland’s request for a financial bailout

After weeks of speculation into the financial situation in Ireland, the country has come out in the open and has asked for help of £16bn.

Speaking to Channel 4, Irish Prime Minister Brian Cowen said, “The European authorities have agreed to our request. A formal process of negotiation will lead to the provision of assistance on the basis of programme to be negotiated by the government with the European Commission and the International Monetary Fund in liaison with the European Central Bank.”

For over a week, the Irish administration insisted that they did not need financial help. This has left the public angry as they feel thy have been lied to.

People of Ireland have vented out their anger on Twitter. “When have we ever been told the truth about our economy?” asks Bond123 on Twitter. Alpha says, “First they take Northern Ireland and then the entire Ireland will go into UK pocket.”

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