Dr. Donal Donovan:

I cannot speak about the rationale of the financing terms associated with the EU component, although I understand, if my memory is correct, that when the rescue fund was set up, the idea was that it would be the cost of borrowing the funds from the markets or wherever, plus a margin of perhaps 1% to cover administrative costs or risks or something like this. This produced a number. Subsequently, this formula was changed very substantially, if I am correct, in the case of Greece. The administrative margin was eliminated and there was another way of looking at it. This had the effect of lowering the cost. These are essentially political decisions by the EU.

The IMF is a bit different. There is one formula which applies to all countries. There is a slight difference between very poor countries and others, but essentially there is a formula applied to all countries. It is not a political decision. It is not a question of people in the IMF wondering, "What will we charge Ireland and what will we charge Iceland or Greece?" It is a standard formula based on the average of treasury bill rates, current and prospective, with a margin.