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Irish protest – sort of – as bailout details emerge

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Interest rate objections

The principal objections are to the interest rate imposed as part of the deal.

Irish Finance Minister Brian Lenihan defended the 5.8 percent rate as fair, saying that it was equivalent to the 4.5 percent interest rate imposed on Greece for its bailout in the spring. Ireland must pay a higher rate, according to the government, because its loan extends four and a half years longer than Greece's three-year loan, which means the Irish government will be paying yearly interest on a smaller amount of debt.

“This is a very good deal for Ireland in current circumstances,” IMF mission chief Ajai Chopra of the bailout terms.

Stephen Kinsella, economist at the University of Limerick, says the interest rate is high but that setting it was a balancing act for the ECB and IMF.

“The interest rate has to be low enough to ensure Ireland has some chance of paying it back, but it also has to be high enough to push Ireland back into the private sovereign debt market,” he says.

Dr. Kinsella says the deal is a good one for the country given the circumstances – but he notes the burden it places in Ireland. That burden is fueling public discontent ahead of a general election expected within two months. The Green party recently announced its intention to pull out of the coalition government come January.

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