Britain ‘to gain £440m windfall' from Irish bailout

Britain could make a profit of up to £440 million from the bailout of Ireland, the Government said today.

Chancellor George Osborne told MPs that the Irish will be charged an interest rate of 5.9% on the £3.25 billion emergency loan to their government.

The rate is two points above the costs to the UK of playing middle-man by borrowing the money at its own risk to pass on to Dublin.

Osborne said today: "People ask, of course, why are we extending the loan to Ireland? We are doing this because it is overwhelmingly in our national interest that we have a strong Irish economy and a stable banking system.

"It is not just about the Irish economy and Irish jobs, it is about the British economy and British jobs.

"A loan does not add to our deficit and any increase in borrowing is matched of course by the commitment of the Irish to repay with interest.

"Ireland is the fifth largest market for British exporters, accounts for 5% of our total exports abroad. Every man, woman and child in Ireland spends on average £3,600 a year on British goods. That is how connected our economies are."

The bilateral loan to Ireland will form part of a (72 billion package of assistance from the International Monetary Fund, the European Union's financial stability mechanism and the eurozone nations.

Other loans from European countries will be charged at a similar rate. The European Commission ignored protests from Dublin that it was charging too much, saying: "It is extremely preferential."

Irish critics say loans from the International Monetary Fund cost only 3% — but these are floating rather than fixed.