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Bailed-out EU countries should get interest rebates, says MEP

Bailed-out EU countries should be refunded some of the interest they have paid on loans once they pay off their debts, according to the chair of the EU’s economic and monetary affairs committee.

Liberal Democrat MEP Sharon Bowles says she is concerned at the high levels of interest bailed-out countries are paying and says rich EU members stand to gain at the expense of poorer nations.

She says: “I propose the profit, or premium, which sponsoring countries currently make out of the high interest rate, and which is higher than the cost to them of providing the loan, should be returned to the borrowing country once they have repaid their debt in full.

“The overall health of the EU economy will be much more viable and sustainable if struggling countries get these premiums back, rather than letting better-off countries pocket them.”

She says until a country’s debts are paid off in full, premiums should be kept in a pool to act as insurance against defaults.

It was reported last month that the coalition Government hopes to make a £400m profit from its £3.25bn bilateral loan to Ireland, for which the interest rate was set at 5.9 per cent.

Bowles says Ireland is facing an average charge of around 5.8 per cent on the €85bn rescue package offered in November by EU member states. She says member states should not be acting like investment banks.

She says: “Fellow EU countries should be acting out of solidarity with their neighbours, not like investment banks. It is fair that a country sponsoring a rescue package should not be out of pocket and should be guarded against risk, but that does not mean they have to pocket windfalls.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. An interesting proposition but seeming to fail to understand the basics of business or finance. So Sharon Bowles wants a world where risk is rewarded with nothing…so why would anyone lend the money? What if they don’t pay the money back? Its comforting to know these people are making all the important decisions that we all have to live with. One would have thought even a Eurocrat would know the Golden rule – whoever has the gold makes the rules.

  2. Dominic, if this were truly a capitalist world we lived in then the UK, German and French bondholders who invested in Irish banks (and lost) would be burned. Instead the Irish people are being forced repay a bondholder/bankers debt that has nothing to do with us because our corrupt government guaranteed these untouchable bondholders deposits via Anglo Irish Bank and other toxic banks in Ireland. Irelands national debt isn’t the problem (and is quite manageable on its own), but it was the blanket guarantee given to Irish banks by a yellow-bellied Irish government with no mandate acting on behalf of bondholders in major European countries.

    Hence why your comment regarding ‘risk’ was more than ironic enough to compel me to reply.

    Conor.

  3. Rewarding failure? Failure to run their economies correctly?

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