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THE IRISH GOVERNMENT is reportedly seeking to issue its largest ever bond – worth as much as €40 billion, with a 40-year maturity – in an attempt to replace the promissory note system which is currently being used to fund the wind-down of Anglo Irish Bank.
A report from Bloomberg, citing two government sources, says the government could issue a 40-year bond to the current Irish Bank Resolution Corporation, which could then be used to access everyday funding from the European Central Bank.
This would replace the promissory note which is currently used for similar purposes – and would mean that the government would not have to foot an annual bill for €3.06 billion to make its annual repayment.
Bloomberg notes that it would also avoid the thorny issue of whether the permanent Eurozone bailout fund, the European Stability Mechanism, would have to take a direct stake in the bank and avert any European stand-off over the affairs.
The reported arrangement would not make the rescue of Anglo Irish Bank any cheaper, however – and would instead defer the cost of the promissory note until the middle part of the century, giving the government decades to build up the cash to repay it.
The current promissory note works in a similar method to the proposed bond, but instead of presenting the bond to the ECB, Anglo instead presents the bond to the Central Bank of Ireland so that it can get everyday funding from there instead.
However, any move to replace the promissory note – a form of temporary IOU – with a full-blown government bond would cement the status of Anglo’s liabilities as government debts which the State could not shed later.
It would also mean that any hopes of sharing the burden for the Anglo rescue among other euro member nations would be effectively killed off.
The interest rate paid to the Central Bank for the promissory notes is relatively penal, and adds around €17 billion to the cost of paying the note until the latter part of the next decade.
This interest will eventually mean a profit for the bank, however, and would returned to the Irish government as all central bank profits are.
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Oh for crying out loud, why would we issue a 40 year bond? It’s NOT our debt! When are they going to get it!
They get it.
Because our kids and theirs will wind up having to pay for the idiocy of bankers and developers who will in all likelihood be dead by then!!!!
Unfortunately Brian Lenihan and Cowen, the treacherous buggers and their party made it our debt and they went all out to convert unsecured bond debt in to state debt before the new Govt. came in.
Anglo gave many loans to FF members and reps that were never going to be repaid, personal guarantees that are had to be nullified and lost.
Look at why Anglo Irish sold its Austrian division, which had impressive cash deposits, low loans when it was crying out for deposits.
Austria has some of the most secretive banking rules in the world. No one will ever get an answer now and that is not a coincidence.
http://kathleenbarrington.blogspot.ie/2010/09/curious-tale-of-anglo-irish-bank-and.html
An article looking at the strange case of Anglo selling Austria.
Beyond ridiculous!!!
It is beyond ridiculous. It is ridiculous that people still admire and support the traitors Brian and Brian Lenihan. that did this, the cabinet and party that backed them.
The party that seems to have completely forgotten that the guarantee was its creation, its scheme that was solely designed to protect the board of Anglo, its friends who borrowed from it and its elected reps and members who receive loans with no repayment plans or interest.
so much for fG promises of not paying anglo or non secure bondholders now are great grand children will be still paying for it.great to see people have been put in jail because of it do NOT
Its not our bloody debt. The real headline here is that fine gael have FAILED to get a deal and are going to push the debt out 40 years with a bond that will accrue interest all the way and cripple our grandchildrens future.
Oh, and the noonans and kennys will be long gone, having enjoyed their pensions.
We need to get these shams out NOW!
in all fairness. the Irish people are letting the government continue to make bad decisions. look at the protests in Spain and Portugal last week, hundreds of thousands of people protesting. whereas in Ireland people just stupidly brand them ‘commies, lefties and crusties’ all people do on this site is moan and yeah everyone is entitled to a good moan but come on get out and do something if you feel so strongly about it! hundreds of thousands out last week in Spain, Ireland can barely manage a hundred. is this laziness? is it not willing to fight our own battles? when you look at the march SIPTU were able to call last year and their not calling for one over worse things that are going on now.
You’re right but you’re also wrong. Kick them out and then what… The shiiners, Bolix Boyd Barrett and the looney left. This crowd of asreholes are incompetent the others are dangerous
Refusals to pay household tax, Green party wiped out, Fianna Fail almost wiped out, people are protesting, doesn’t make a blind bit of difference, people are and always will be ignored by the self serving elite that constitute our political system.
All well and good to say get out and protest but look at what that achieves here.
People know there’s nothing but contempt and judgement cast on you if you are seen to be out with a banner and calling for change, you get labelled a hippy and a lefty following that, jibes at the unemployed or anyone in the protest should be at work and that “I’m angered that my hard earned taxes are paying these crusties to be loitering around and causing an inconvenience to local shops and businesses”.
If I head out later after lunch with a sign I put together, will people join me and walk by my side or will they shrug their shoulder and throw a look my way of contempt with an air of superiority “Shure look at this clown!, what does he think he’ll achieve, the waster ”
If there is an ad on the radio for everyone to enter the street at 2.30 today and march to the Dial, how many will be looking out their window to point and stare at the very few that actual step out and walk down the street?
One man can’t be heard or make a difference, not in todays “democracy”, it takes ALL of us to make our voices heard.
Until this simple fact has sunken into peoples thick selfish skulls we will continue to be lead by clowns and self-serving weak gombeens.
Don’t hide behind “shure we elected them” mantra. We elected them on their promises to actually stand up for us and to undo the wrong of the last show but they have only acknowledged the previous showers problems and commitments and are running to the tune of “We wont be seen as a nation of defaulters, we pay our debts!” To me, those words are treasonous and to follow them in action is also sealing this nations future in debt that is not ours, and what’s being paid out now should at the very least go to offset our €15 billion still borrowed annually to run this joke of an Island. Actions taken today are now deliberately ruining our children’s chances of living here when they will be faced with far worst debt and problems (pensions etc). Our doing.
We need an effective means today of voicing our wishes to the Dial as they make decisions on our behalf. Letting them stumble and make bad decisions for 4 years and then expect the next lot to sort it is madness and counter productive to getting us out of this awful mess.
Well looks like we are paying it all back either way. At least this way, although stinks, allows the country to get going again, hopefully to the point of making real money so that this debt seems affordable.
Kick that can!
They never had any intention of getting the money back.
About time this was mooted
What you think that a debt that was never a sovereign debt should be accepted as such and be paid off in full?
I also think this should be talked about, it doesn’t mean that it’s the right plan on action, but many options apart from (burn or pay now) have to be discussed.
I personally don’t like leaving this problem for future generations
@Kerry. It was an act of treachery unmatched in modern Irish history that got us the debt. We never should have underwritten international gambling losses by private banks. The fact is, however, that we did. And we quite simply cannot afford to repay that which we owe. The debt must be renegotiated or defaulted on. Personally, I favour a hurtful-in-the-short-term but long-term-correct default, but second best is do something, anything, to manage the burden. I just wish our leaders had the cojones to square up to the European overlords and tell them to piss off.
If you owe a thousand euros to the bank and can’t pay it, you have a problem.
If you owe a million euros to the bank and can’t pay it, the bank has a problem.
Wake up government and start playing your cards right. This wet-the-bed roll-over and surrender attitude is disgusting.
@ Kieran, the problem is as far as I understand it if we issued this €40 billion bond we would be converting the debt into sovereign debt for our children to pay. This has to be stopped. As you say we have already seen 1 act of treachery and we can not stand by while another government considers adding to that treachery. If this goes a head I’ll be telling my children to leave once they have completed their education and not to come back. It is utter utter madness.
Kieran – you’ve identified the problem – we simply aren’t big enough to hold a gun to their heads.
We do have a gun Bob. €60 billion in loans that we can say sorry not our debt if you want to recover it follow it up with the banks involved. What we don’t have is the politicians with the cojones to use it or threaten to use it.
One would hope that by the time 40yrs has come round, €40B will be (relatively) peanuts. In any case, it would most likely be be rolled over at that point, assuming we are still operating with this assinine perversion of a fiat shared currency system.
A point most people miss in all this is that government debt rarely, if ever, is repaid, in any country. The economy grows & it is debt to GDP that matters, rather than absolute level of debt. Countries (& their economics) are +not+ like households. Please cop on to this everybody ;)
What matters most then with this (& any) gov bond arrangement is the interest rate – which in reality IS the effective total cost – so decimal points are important here, never mind whole percentage points. This is what we need to focus on.
There was only one rationale for bailing out Anglo & the other banks – to protect the stability of the entire Euro area banking system (& even further afield). Ireland & its citizens were not responsible for the operation & design of this mess. (Which still needs to be radically reformed.)
If the Eurozone is to continue this charade (for political/ideology reasons, not monetary economics) & pretend that the ECB, as issuer of currency, cannot simply write off or pay off all these bank losses debts that Ireland has no moral obligation to meet, then any interest rate cost burden should be absolutely minimal – MAX 1%.
Once the bond term is much beyond 10yrs, it doesn’t matter much, but the interest rate really does – it’s what we’re really having to pay, not the principal.
The reverse is true for the €30B ‘promissory note’ arrangement – as already stated, in this case the interest is returned from the ICB to the government, but the €3B annual principal repayments are taken straight from our economy (pockets & bank accounts!) & promptly ‘burned’ (deleted on a keyboard) at the ECB. This is very damaging to growth & employment & is why it is so important we get a deal on this.
Mike: In case it’s of interest, if you assume an average inflation rate of 2% for the next 40 years, €40bn is actually €18.11bn in today’s money.
If inflation was to average 2.5%, it’d be €14.9bn; if inflation averaged 3%, it’d be €12.26bn.
Not our debt – let those who ran it up pay it. Like in the normal world.
Does this mean the deal getting the European bank to take over the banks debt is not happening?
Does it mean that deal was never going to happen, or it suddenly isnt as good as they said and the government were lying about it?
This is the real issue here.
This is arseholery of the highest order
Who knew kick the can was not just a game we played but required training for future politicians.
Not one more red cent, is that what they said..…
“Anglo Irish Bank is not getting another cent of our money and any bank coming to us looking for more money is going to have to show how they’re going to impose losses on their junior bondholders, on their senior bondholders and their other creditors before they come looking to us for anymore money. Not another cent.”. Leo Varadkar Fine Gael Press Conference 9/2/11
I’d like to tattoo that on Leo Vankers head Dave
And that is exactly what has happened.
No bank has got MORE money since! Not one EXTRA penny has been put into any bank since the 2011 General Election. What is so hard to get about this statement?
I wish I had the money to put that on every billboard in Ireland to show everyone clearly the lies we were told.
Ridiculous.. Simple. So all the people who caused it and negotiated the issue etc. with Europe will be long gone… Hope all the files are in order. One point to make,we have ample natural resources and our tax take on these assets should be changed thus generating monies for the state,I know it’s a mad idea isn’t it:-)
This is just ridiculous ! A nightmare scenario for our children and grandchildren… It is up to us to STOP this bulsh1t. Why are we paying Dead banks ,the Troika, the IMF, the ECB etc etc . Billions going to nowhere . Unsecured bond holders . This government and the last should bge run out of town ! They are a disgrace to the Irish nation and the people as a whole . They are traitorous whippets. Cowardly bullies. The Media too are not reporting things as events are happening across the globe. Why is that ! Information is power so keep the people ignorant and tell them nothing only THREATEN them.
Well I will not be threatened .I am tax compliant I pay my TV license , car tax , car insurance , bin charges , my mortgage….etc etc …. Don’t Register , Don’t pay . Stop paying the crooks .
No its not a nightmare scenario for our children and grandchildren because the point of putting the debt out that far is that growth and inflation will eat into the real amount of that debt.
It would the same as if I had given you £20 back in 1972 and asked you to pay me that £20 with a small bit of interest back in 2012. Look at the difference in buying power of that money then and now. Even if you paid me back the equivalent of double that (say £40) it would be a good deal for you.
Jim Walsh
The point is we should not be paying out this money at all.
Wake up for goodness sake and smell what they are doling out !
It is utter treason. They will all be dead by then !
I’m very wide awake Eileen and I have my opinions and I am entitled to them. Please don’t insult me just because I don’t agree with you. I don’t agree with you but I don’t insult you. Please behave like an adult.
The fact is that when the Bank Guarantee was put into place in 2008 those debts DID become the state’s debts and we are going to have to pay them back. Perhaps some deal can be done with regard to getting rid of some of that debt but if not then the idea of a long term bond is a better option that what is currently in place.
As for the rest of the red thumb brigade. I really don’t care if I got a hundred million red thumbs so don’t waste your time.
Jim Where did I ” insult ” you ?…. But you are right of course I certainly do not agree with you or with the Lies this government have dished out to us over the past 18 months . I too am entitled to my opinion and to say that I am feeling upset at every lie that is told to us is an understatement. I can not abide liars . So you go on and be deluded that is indeed your right . I will always speak out at wrong doing.
Dame Enda strikes again!!!
Strikes out again more like!!
Does this mean the deal getting the European bank to take over the banks debt is not happening?
Does it mean that deal was never going to happen, or it suddenly isnt as good as they said and the government were lying about it?
This is the real issue here.
This is arseholery of the highest order…..
The best way is to treat this debt like war reparations. Start paying in 40 years and pay over 50 years.
By then €40billion will get you a breakfast roll and a holographic copy of the Irish Farmer’s Journal
Anyone who wants to know what’s going on here should read John Perkins – Confessions of an economic Hitman. We are being riddled with debt so corporations can steal our oil and gas deposits and use our island for a strategic military location. Perkins is one of the key speakers in the Zeitgeist trilogy
Beware of the voices….
Well said Sean
And I think eventually they want to drink our blood and turn us all into zombies!
I wonder why the government are doing this? Are they trying to detach themselves from some future crisis and speculation? Will this remove any influence or pressure from Germany and the ECB and free up the government to do what it wants once it exits IMF?
This is not our debt… I agree, however to coin another well worn phrase “we are where we are”. With inflation and some sensible budgeting would this debt not be very manageable?
Will we ever find out what happened the night the banking guarantee was rubber stamped? Who in Europe told who in govt to give the green light on it ? Where is the paper trail? If Europe pushed us then this debt needs to be taken off our shoulders.
Probably nothing to do with Europe. More likely just the sheer stupidity of the two Brians. You’re probably thinking about the famous ECB letter which is a slightly different issue. The two Brians were the ones who hung the “Kick Me” sign on Ireland.
And the can gets kicked further down the road, disgraceful (if this indeed happens)…
Just default. Be done with it.
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