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THE EUROPEAN CENTRAL Bank is reported to have ruled out the prospect of allowing Ireland to issue a long-term government bond to replace the promissory notes given to the former Anglo Irish Bank.
Reuters cites sources at the Frankfurt-based ECB who said the proposal was discussed at a meeting of the bank’s governing council this week, but deemed to be in breach of the European Union’s founding treaties.
Article 123 of the Treaty on the Functioning of the European Union prohibits the ECB or national central banks from offering credit facilities for “public undertakings of Member States” – with the bank’s governors reportedly agreeing that this prohibits Ireland from replacing the promissory note with a bond.
Promissory notes, a form of IOU, were issued to the former Anglo Irish Bank and Irish Nationwide before the two bodies were merged into the Irish Bank Resolution Corporation.
The notes – worth a total of €30.6 billion – are deposited with the Central Bank of Ireland, which in turn allows the now-IBRC to borrow cash equivalent to those amounts. IBRC, which is fully owned by the government, must make an annual repayment of €3.06 billion each March.
Because the money repaid to the Central Bank is essentially destroyed and taken out of circulation, many economists have argued that IBRC should simply default on the repayments – a prospect the government has ruled out, seeing it as tantamount to a sovereign default.
Earlier this month several Irish ministers said they were confident that a deal could be reached to avoid the next €3.06 billion repayment, due in nine weeks’ time.
Only last Sunday, Taoiseach Enda Kenny told RTÉ he foresaw the promissory note being restructured “from a serious overdraft to a long-term, low-interest mortgage” – an arrangement that would probably have meant the issue of a long-term government bond to replace the promissory note.
Separately, a spokesman for the Department of Finance played down newspaper reports that a secondary IMF bailout fund could be made available in order to assist Ireland if it was unable to gain full, long-term access to bond markets at the end of the current deal.
The spokesman said: “As set out by Minister Noonan following the last Troika review, we have asked the Troika to prepare a paper setting out possible supports that may be available to Ireland as we exit the programme.”
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Bang on.
Unfortunately our government don’t have the balls to default. Enda wouldn’t win person of the year if he defaulted and that’s all he seems interested in.
Seriously,did anybody believe the tripe that we were being fed !!!!.
Are people surprised ?.
Vincent and Mark do, plus many undercover FG footsoldiers!
Please dont tell me anyone is surprised by this, The people knew it and the only ones that didnt are this Government that have used this as a pawn for Referendums and voting YES #Spin
Mother of sweet divinity what next….
The government need to grow a pair of balls,expose the letters sent to Brian lenihan show that it was illegal,if they have a problem with that,sue us,we have nothing left to give to this scam of e.u
They knew that before it was put forward, they have a copy of the EU treaties and this is a stunt to pay the note. What they’ll pretend is, we tried and they said no! Don’t be fooled by the smoke and mirrors, or FG/labour are really that thick? You choose!
Option One: Write off the debt in its entirety
This option involves the complete non-payment of the Promissory notes.
Although this may appear drastic, its impact could be minimal. The only
“loser” in this scenario is the ICB since the Promissory notes are owed solely
to that institution. However, the ICB, like any other Central Bank, but unlike
other institutions that would simply become insolvent if they incurred losses
on this scale, is able to absorb the losses it incurs on the Promissory notes
because it can simply create money. An institution that can create its own
money cannot go broke provided that the money it creates is accepted by
those who use it. Central Bank losses are only a notional concept. Taking this
approach would significantly reduce Ireland’s debt burden and, therefore,
increase the likelihood of rapid economic recovery. However, this option is not without its pitfalls. Other Eurozone countries could
seek similar arrangements for their own indebted banks. If this arrangement
was carried out wholesale across the Eurozone it would lead to significant
Euro inflation. Moreover, such an approach would need approval from the
ECB. The ECB could disallow such a move if two thirds of its governing
council deems it to be contrary to the ECB’s objectives. Some may argue that
such a move would be contrary to the ECB’s objectives since it has the
potential to increase inflation, a deep-seated fear in the ECB. It could be
argued, however, that the risk of inflation would be minimal if Ireland was
given sole permission to take this action. Europe-wide political approval
would, in theory, also be required. Obtaining ECB and wider political approval
would not be easy but it is not impossible.
Very well said. We don’t even need to go down the non-payment road Anna, we can change the due dates on the notes, push them out 100 years if necessary, and use the 3 billion as a stimulus while theres still an economy to stimulate.
When the boys that are suppose to be Negotiating for us have proven that they are traitors and will leave the people of Ireland on the noose .The ECB will tell them piss off all day long even on a crap deal like the one #GOV wanted.The Bankers see no threat or negotiating skills by these jokers anyway Kenny and Noonan work for them and anyone who thinks different would want to get their head checked the evidence mounts everyday.Getting told go home paddy on a shite deal does’nt bode well for us. nevermind them stooges in Government they’l be alright.
That was proven when the banks where guaranteed, then again when the current crowd got in and vowed to repay everything.
I think it has to be ABSOLUTE for some people but Government are running out of rocks to hide under.
Great news, as we can’t possibly pay back all of our private bank debt another solution will have to be found.
its called telling the ecb to kiss our holes.
Ciaran
The easiest way forward is to replace the current Promissory Note with one that has a longer maturity and forget about using a sovereign Bond. Same result with different means and this time it’s perfectly legal.
Mark we are not legally obliged to pay this debt so give the legallity crap a break. Watch FG-BORGS talk shite all day it wont change a thing they sold us down the river and they have just forgot to tell us.Liars
Spoken like a true blueshirt mark! Why should I have to pay private bank debts? I am so sick of Fine Gael with their shite talking, I wish they would all jump off a cliff.
In all fairness to paddy/michael/mark he’s right. Push the due date back, and then push it back again in the future.
No, that would just result in huge on-going interest bills that would increase the deficit.
Incorrect. The notes are IOUS and only accrue interest once converted to bonds etc. like noonan did last year.
The Irish people are just too accepting. There’s no point grumbling at home in our living rooms. What motivation have these institutions to give us an easier option – we need to be out on the streets threatening the stability of these cosy arrangements!
No, the interest was rolled up for the first 18 months but is now payable each year – it is irrelevant whether it is a PN or a bond
It shall be interesting to see how FG/LABOUR spin this news !!
Enda’s on the phone to the comms. clinic as we speak.
“It’s all a misunderstanding, the deal is still on the cards. We swear!!!”
I’m sure it will be something along those lines.
You are all dreaming, We are not in a bailout and the Troika don’t exist!
The Banks all seem to be running our lives and this country. The same banks whose greed have caused such devastation to our economy. Our Govt if they want to remain in Govt and if they are supposed to represent the best interest of the Irish People need to pull their finger out and start fighting for us instead of fighting us to keep the banks happy.
If the Coalition don’t start representing us and standing their ground and cleaning the mess that they allowed to happen then we need to destroy the banks and destroy the political system and come up with a process that’s fairer and that will never allow corruption to flourish and thrive as it is doing now.
oh well, thats that….
You can’t take knickers from a bare arse and our arse has never been as exposed as it is now. 3bn in March? Hahaha
Its not 3Bn in march. Its 6.2 Bn.
The Dogs on the street knew this was going to happen.
But sir we’ve been good boys sir.
Another thing.
Unions Leaders in this country need need to grow a pair and start representing US. Being the ” Poster Boy” of europe has gotton is sweet f@#k all !
dont start about the unions. another bunch of cronies.
I’ll be very surprised if theres not a deal on this. Irelands debts are not sustainable and the ECB know this. More than likely PR to make the Irish government look good when a deal is made. Bunch of tossers the lot of them.
Can we press the default nuke button or have we paid back to much already.
It’s never to late to do the right thing..
FG & Lab have never represented Ireland at eu level they have only ever represented the eu to Ireland. The eu found nothing illegal when noonan pulled a bond out of his hole last year so that bondholders could again shakedown the Irish people. That is what they designed austerity for
A piece from the journal a few weeks ago
http://www.thejournal.ie/enda-kenny-promissory-note-752487-Jan2013/?emailpost
Thanks for the link, just reinforces what a —- Kenny is !! Not to many defenders of the faith on this thread .
Central Banks owned n controlled by Rothschild s. This crisis is meant to impoverish middle class by loading em with private debt and it has done so. Get countries like Ireland to sign away their sovereignty. Research the role of Peter Sutherland in Bilderberg group and Denis O Brien. John Bruton etc.
They are close to success in forcing a non democratic federal Europe that they control. Media also controlled. Noonan at last bilderberg meeting. Enda just a clown. Unions silence bought n paid for by Croke park agreement – this will quickly change when new cuts will be unveiled.
This is a shocking revelation.
If this unravels the only good thing I’d whatever shred or vestige of confidence some have in this balls of a government will disappear. If this does not result in a substantial result for this country Kenny & Co will once again be proven to be utter liars. General election anyone?
Ive been to 2 Austerity protests so far and by the looks of it ill be going to Stephens green on March when these shower of wasters hand over our money, who else will be marching, no good us all arm chair protesting on here, we need to get out marching everyone public service, private, pensioners, social welfare recipients, if 50% of the people on social welfare got out and marched we would have over 200,00 on the streets, There going over there like beggars with cap in the hand help poor paddy, were a proud honorable people with a great culture and history and enough is enough, Threaten default tell them we cant afford it which we cant its not our debt, were paying 3.1 billion for an institute that’s bankrupt, were paying about 40 euro a week out of our hard earned wages for developers and politicians retirement investments that went tits up, history will judge us the Irish people who lived in these few decades and they will judge us badly the ones who let Europe walk all over us, the ones whose grandchildren are still paying for debts that they were not alive when they were incurred its not too late to change, i bought into Labours way not Frankfurts but was all a smoke screen, next election kick them out we need a new political party get rid of labour, (FF FG same party ), everyone vote sinn fein if needs be, were going to get a bank deal but it will be the bear minimum which wont help us that much they will dress it up but a turds a turd even with a different name, debt write off are the only way to solve this crisis Germany got plenty after world war 2
does anybody at ECB realise that 1.8m tax payers in Ireland are trying to pay off 367bn of state & mortgage debt!!
Well if that is the case after all the people’s very very hard work we should tell them to feck off
While we are obediently paying off everybodys debts for them, we will never get a deal. Fine Gael know this, but they’re europe first all the way.
Some form of deal will have to be done because if there isn’t a deal then the chances of Ireland avoiding a second bailout will be nil and that is exactly what the EU/ECB don’t want. The current markets rates for Irish bonds are predicated on Ireland’s debt burden being reduced by some form of long-term deal.
The EU/ECB need Ireland to emerge from the bailout programme and be able to go back to markets in the middle of the year so that they can point to Ireland as an example of how the current approach works. If Ireland is forced into a second bailout then it undermines everything that the EU/ECB have been promoting for years as the solution to the debt crisis.
took you long enough to wake up jim
said it before christmas
please dont play party politics shite
hes not up to it he never was
its all about saving oneself
Can’t say I’m one bit surprised with this report, had a feeling it was coming, what spin will FG/Lab put on this tomorrow, its time our Enda stopped being Merkel poodle, grew a pair of balls and some sharp teeth.
Wheres Vincent Dolan? Whats goin on Vincent? Don’t be too hasty to judge folks. Vincent will be able to tell us this was expected, and part of the FG/Lab master plan.
I’m a reasonable person. I’ve supported this government in what it has been doing , but if they don’t get a deal that takes bank debts away from the public finances we should storm the metaphorical Bastille (and yes I did see Les Mes tonight & I’m a bit militant..)
Its not our debt,and never was.They gambled,they lost,tough.
Unplug the game..Alt,Delete and shift the focus!
Well that’s improved language from Mr Gilmore say it will sink Ireland. at least he’s addressing the reality of the situation. We can’t afford it, those banks investors will just have to take the hit.
And, as things stand a second bailout is almost a certainty.
grow a pair eamonn. don’t just take whatever scraps that you are thrown
have your say