The European Union (EU), under the auspices of the European Financial Stability Mechanism (EFSM), and the European Financial Stability Facility (EFSF,) have finalised their issuance calendars to raise funds to provide financial support to Ireland. The calendars have been closely coordinated between the EU and the EFSF. This will ensure smooth market operations over the entire duration of the support programme. The EU intends to launch the first bond at the beginning of January. The EFSF is expected to follow with its first bond issue towards the end of January. The EU and the EFSF will however carefully analyse the markets after they reopen in the New Year and may adapt funding plans accordingly.
Issuances by the EU under the EFSM will be denominated only in euros. The EFSF will also most likely issue in euros, but it does not have any currency limitation for its funding activities and can adapt to market developments. Issues for both EU and EFSF will be mainly in standard benchmark maturities of 5, 7 and 10 years. The EU and the EFSF are rated triple A by the three major rating agencies, Fitch, Moody's and Standard & Poor's. Issuances by the EU are executed by the European Commission's financial operations department located in Luxembourg. They will all be launched through a syndication format. Issuances by the EFSF are executed by the German DMO on behalf of the EFSF. The first transaction of EFSF will be launched through a syndication format.
The Eurogroup and the EU's Council of Economics and Finance Ministers had decided on 28 November 2010 to grant financial assistance in response to the Irish authorities’ request. The financial package will cover financing needs up to €85 billion. The EU will provide up to €22.5 billion and the EFSF up to €17.7 billion1 over 2011 and 2012.
In the first quarter of 2011, the EU (under the auspices of the EFSM) and the EFSF will disburse €11.7 billion to Ireland in total. Disbursements envisaged by the programme over the subsequent quarters are subject to the requirements of Ireland and to quarterly reviews by the Commission in cooperation with the International Monetary Fund (IMF) and in liaison with the European Central Bank (ECB).
Further support will be made available through the International Monetary Fund (€22.5 billion) and bilateral loans from UK, SE and DK totalling €4.8 billion. Ireland contributes €17.5 billion through the Treasury cash buffer and investments of the National Pension Reserve Fund, which will be used to stabilise the national banking sector.
The EU may complement its funding needs by smaller bond issues, either through taps of issues launched under the EFSM or targeted transactions. In the first half of 2011 the market should expect 3 EU benchmark transactions.
The EFSF in 2011 will raise funds up to €16.5 billion and in 2012 up to €10 billion. It intends, also subject to revision, to launch next year 3 benchmark bonds aiming at €3 to 5 billion for each transaction. The EFSF may complement its funding needs by smaller bond issues, either through taps or through targeted transactions. Syndications, auctions and private placements may be used: in the first half of 2011 the market should expect 2 benchmark issues.
© European Commission
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