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THE EUROPEAN CENTRAL BANK’S Governing Council will probably be asked today for formal approval for a deal on Ireland’s promissory notes, as indicated by Michael Noonan last night.
The fortnightly meeting of the ECB’s top decision-making authority – of which Central Bank of Ireland governor Patrick Honohan is a member – is likely to discuss the matter today.
The state had been due to make the first repayment on the promissory notes – a form of IOU given by the State to Anglo Irish Bank, and then used by Anglo to access funds from the Central Bank – at the end of this month, with €3.06 billion due.
Last night Michael Noonan told the Dáil that while a deal was not yet completed, there was now general agreement that the first repayment could be replaced with a government bond.
This would not reduce the overall debt owed by Ireland, as it would still be due to pay the €3.06 billion at some other point in the future, but it would crucially mean that the government did not have to make a cash payment at the end of this month.
Bloomberg reports that Patrick Honohan will today seek formal ECB clearance to accept the bond-for-note swap – approval which is considered highly likely given the nature of Noonan’s public disclosure last night.
While the conclusion of a deal would be a welcome development for the government, which will claim the agreement of any deal as a major diplomatic victory, the details of the bond being ‘sold’ to IBRC are still yet to be disclosed.
While it is widely assumed that the bond would not be repaid until 2025, it is not clear whether the bond will mean what are called ‘coupon repayments’ – where bondholders are paid cash every year or so, as interest on those bonds.
If the bond does carry coupon payments, the overall effect of the bond could be that the State will pay more than the €3.06 billion it is due – though this could mean a net saving to the State given the effects of inflation over a 13-year period.
This morning Fianna Fáíl’s finance spokesman Michael McGrath said the deal, as indicated by Noonan, would assist Ireland’s re-entry into bond markets – and that this would be further strengthened if a deal for the 2013 repayment could also be made.
“This is a good first step,” he told RTÉ’s Morning Ireland, while stressing that the deal could only be seen as “an interim measure” while the government continued negotiations to deal with the total bill for the €31 billion in notes, which will cost almost €48 billion after interest.
McGrath said Ireland needed to secure not just a deal to manage the repayments of the promissory notes, but a deal to reduce the amount it owed.
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Least that defaulters tattoo is off the cards if we get this deal. It will only mean a extension of this non existent debt. So noonan doesn’t want his bonds to be worth nothing so maybe he will buy some of these extension bonds as well. Sure aren’t this government great they really do there best for the Irish people. Our children will thank us with elder abuse me thinks.
So kids who are 10 years old now will have to bear the burden in 2025 if there is a job market for them to enter? Why is this shortsighted plan any better?
Most of our debts and most of our borrowing is from the government spending more on day to day services than it collects in taxes. Children are already being asked to pay for the lifestyles of todays adults.
Neil we are talking about Anglo’s and other bank debt here not about the difference between what’s coming in and whats going out. Try to keep the 2 things separate. The budget deficit is being addressed. The Anglo debt is a ball and chain for our children for the next 30 odd years. Debt I might add that was not created by the majority of the Irish citizens being told to carry it.
Don’t know about anybody else but seems like a con to me.A full writedown is the only option that should be pursued.
Write down = default. Ireland cannot afford to lose international credibility in the same way Greece has.
Except a full writedown is not available. The next best option is to defer payments on the debt. This has the twin effect of relieving pressure on the current fiscal deficit and supporting our re-entry to the bond markets and secondly, seeing the overall cost of the debt erode over time due to the effects of inflation and economic growth (when it returns).
Contrast the slow, steady and concrete progress that the government has made in relieving this part of the outrageous bank debts that Fianna Fail forced on us with the histrionics demonstrated by SF and the other defaulters whose shape-throwing betrayed the gaping hole at the heart of their argument … i.e. that if you default others will rush to lend you even more money!
Desmond/ Simon,
We are turing bank promissory notes into a sovereign debt. Up until now, if we defaulted on the promisory notes, they didnt definitively impact the Glabal Bond market, as the nores are not bonds. Most people dont seem to realise this (and obviously Noon and FFg/Labour didnt understand this either).
So, if we fail to resolve our economic issues over the next 10 years, and we decide to default then (orif the marketsperceive we are high risk at any stage of defaulting on the bonds, then we will not be able to borrow on the bond market again).
Secondly, Children of 8 years old today, are going to have to pay down the banking debt that their parents didnt want to pay. How crazy is that?
Thirdly, we will be foreced to pay interest on this banking debt, once it becomes sovereign debt. Right now, the banking debt promissory notes are charged interest at 1%. Once it becomes sovereign debt, we will be paying in the region of 3% interest.
So, in summary, we have kicked the can down the road, so the next generation can pay it off …. even though it was never our debt to begin with. All this is done under the guise of trying to persuade the Irish people to vote yes on a referendum that will force austerity on future generations of Irish children. And FFg/Labour think this is a good deal???
Well said Cal.
@ Simon. It does not have to mean a default. A FG td himself whose a serious economist has stated himself that the prommissary note co9uld be deferred indefinitely without triggering a credit event. What we have here is the politics of cynicism at its purest. We’ll see inda next week at the ard fheis getting a standing ovation for this ‘victory’ of turning a debt that is not ours into one which will be on our childrens shoulders.
This note and if i’m wrong by all means correct,is not sovreign debt therefore it would not be a state default.
@Desmond a short answer ” kicking the can down the road”
Our democratically elected Government* made this our debt. A targeted restructuring is the best we can hope for.
What matters here is what the interest rate will be on the bond and what the story with the rest of the repayments due to IBRC/Anglo.
This is looking like a very good job of work by Noonan.
*I didn’t vote for them either.
Thats it i’m getting dizzy from all the spin.
I heard Brian Hayes on the radio last week saying that the media have turned this into a big issue, he asked ‘where were the media last year when this was being paid, because yes, this was paid last year’, and as I suspected, this is the first payment due on the promissory notes at the end of March. What hope have we got when our elected representatives know less than we do?
How the hell is this a good deal? We are about to take a debt that we can credibly and morally say does not belong to us and convert it into a soverign debt which will DEFINITELY belong to us. It’s bloody treasonous. We saved the ECBs and eurozones skin with the promissary note. A full writedown and a very large feckin thank you should be what we’re looking for. This will befal our kids when Noonans sitting on his arse with a fat penson and the spoils of his German bunds. Conflict of interest much?
Great news, well done to our government. The FF clean up operation continues.
I don’t trust any of them! This is all designed to ensure a yes vote in the fiscal compact treaty! As long as Ireland’s saddled with this farcical debt, the economy won’t recover. It’s only a buying time excercise!
Well done for deferring repayment of gambling debts the Irish people should bear no responsiblity for, while possibly turning them into soverign debt in the process?
Yeah well done alright, back slaps all round. More patriots!
U said it, Rommel.
@David. It’s not great news. Its turning a debt that does not belong to us into a debt that does. Would you call being forced to pay your neighbours gambling debt, but not till 2025, great news or would you be phoning the Guards and your solicitor?
Lets get real folks! Under our terrible circumstances this is good news.
Can anybody tell me the following simple information.
Currently… (without any future bailout)
1) How much does/will Ireland owe at the end of all these bailouts. (i.e. what is our national debt)
2) how long do we have to repay this debt?
3) How much will the government repay per year?
From what I remember
1/ Total debt will ‘peak’ at 200bn all going well. BTW Anglo will be responsible for 47bn of that.
2/ Not sure 10 years maybe?
3/ Anglo 3.1bn for 10 years
5bn interest charge on the bailout loans per annum.
Add to that we need to pay back the capital.
Just one more thing. Does anybody know if this government will accrue interest. It was mentioned last night that it would accrue 3% per year for the 12 years. If this is the case then it will actually cost our kids MORE i the long run. Can someone confirm this that knows their stuff please?
* should be “if this government bond will accrue interest”
You’re right, we end up paying compound-interest.
Still voting No.All this pr***ing around with the note for Anglo is to try and buy a yes vote at 3% per annum on 3.1billion for 13 years.Great bargin Michael your as good a finance minister as you were a health minister.The only difference is this time you can’t threaten to drag a dying mother through the courts.You’ll just endenture us further to the ECB.
Seanie’s gambling debts are being shuffled around – anything to get the referendum passed
Seanie must be laughing his head off
Why restructure ?
That will only increase the interest and prolong the pain.
It’s private debt to a private bank.
Not our responsibility.
If this repayment is deferred, a gesture should be made to the people, something like the nine hundred dollars Kevin Rudds government paid out in 09!
This private debt alone will cost every household 28,000.
It simply not possible nor is it our debt.
Don’t ask the ECB, ask the people.
Obviously I’m not in the room when these things are discussed but I would hope that the irish representatives will use the upcoming referendum as a pressure point to get the Ecb to approve this deal… That said, the Ecb members are unlikely to be easily manipulated
Would love to be fly on the wall for these things….
We are doomed if we can tolerate a parliament which can justify this mess and then sell it to us what hope have we when they come looking for the last slice of bread or maybe a vital organ the people are defeated pay up, shut up, keep your head down and hope your not there when they come looking.
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