German finance minister Wolfgang Schauble was in Dublin today to launch the new Strategic Banking Corporation of Ireland (SBCI). Speaking in Dublin's Farmleigh he praised the Irish economy, commenting that he is “totally confident that Ireland is on track” and that Germany is “jealous” of Ireland’s current growth figures.
1. What is the Strategic Banking Corporation of Ireland?
The SBCI is going to handle €800 million that is being made available to SMEs in Ireland. The SBCI will pass the money onto AIB and Bank of Ireland who will lend the money to SMEs who are looking to expand.
The banks will give the money to SMEs at low interest rates and they will have a lot of time to pay back the loans.
€800 million is the initial sum but as much as €4 billion could be made available.
2. Where is the money coming from?
The European Investment Bank will contribute €400 million, €240 million will come from the Irish Government, and €150 million will come from the German state bank KfW.
3. How did Germany get involved?
Enda Kenny made a deal with Angela Merkel, agreeing that the state-owned KfW bank would make the funds available for Irish SMEs.
The EU has very strict rules about this kind of thing. Both parties have to be careful not to breech Brussels' state aid laws. The money is a loan, not a gift, and will be repaid with interest to cover Germany's costs.
4. But why are we now getting so much love from Berlin?
On the surface the logic is that their exports are down and they need strong economies around them if exports are going to improve.
Mr Schauble also made reference to the huge contribution Ireland made to help stabilise the euro. Europe is rife with speculation about the political workings behind the deal.
5. What’s in the fine print?
The funds that the SBCI pass onto AIB and Bank of Ireland will be carefully monitored, making sure that the banks are not profiting from the deal.
Property businesses are excluded. SMEs can only avail of the loans to expand their businesses; they cannot get loans to cover existing debts.
