Our EFSF debts. These amount to €20bn or 10% of the national debt. We have ESM debts too.
(in € '000) 31.12.2017 31.12.2016
Loans under EFSF 1
- to Ireland 4,251,265 4,225,119
- to Portugal 7,175,315 7,167,124
Loans under EFSF 2.1
- to Ireland 14,351,622 14,334,069
- to Portugal 20,344,175 20,329,844
- to Greece 137,436,481 136,083,145
Loans to euro area Member States 183,558,858 182,139,301
As we can see 70% of the EFSF debts of around €200bn are unlikely to be repaid and are not going to be refinanced by other means by the sovereign involved. The EFSF was meant to be ‘temporary’ unlike the ESM which is permanent.
Ireland could refinance EFSF as sovereign debt from 2021 onwards when some are to be rolled over (at least we seem to intend a rollover) . We pay 1.7% interest on these ( at least, it could be more) and we could replace them with a mixture of 10 and 20 year bonds where we save a few quid interest going forward. If you refinance €2bn a year at our current 10 to 20 year rates between 0.6% to 1.0% you might save 0.7% or 70bp in interest per €2bn refi per annum or €14m per annum, small beer in the overall scheme of things but still beer. A note on EFSF and ESM rates here. > https://www.esm.europa.eu/lending-rates ESM Loans are cheaper and likely will never be refinanced before eventual expiry.
However the interesting bit is our hard investment in the EFSF. Against the €184bn of EFSF loans the Eurozone members paid in €28bn capital and we paid in €0.5bn of that.
Were Ireland and Portugal tro refinance their EFSF loans as sovereign it could result in a 30% reduction in the size of the EFSF and a refund of 30% of our investment, c €150m, as well as the annual savings on interest payments above. In theory, anyway, we get €5m back for every 1% reduction (or €2bn) in the size of the overall EFSF itself whether we or the Portugese do it.
We ‘invested’ another €2bn in the ESM (again that is IIRC) but as that is a permanent mechanism we are unlikely to see much or indeed any of that ever coming back to us as a return to shareholder. Not in my lifetime anyway.
Combined, we can see that 1-2% of our total national debt was incurred merely so that we could ‘invest’ in these 2 bailout mechanisms as a shareholder. It would be nice to begin the wind down process on the EFSF, preferably next year if low rates hold. Our overall debt will still be below 60% of GDP even if we borrowed €10bn specifically to refinance EFSF bonds due to rollover.