Negotiations under-way on Promissory Note deal

The European Central Bank. Notice a sculpture ...
The European Central Bank. Notice a sculpture of the euro sign. (Photo credit: Wikipedia)

After last nights announcement in the Dáil by Finance Minister Michael Noonan, full statement on Karl Whelan’s blog, negotiations are under way between Central Bank Governor, Patrick Honohan, and the European Central Bank.

The Promissory Note, basically a Government IOU to the Anglo Irish Bank, is worth over €3.1 billion and is due for payment on the 31st of March, which is also the day of the Fine Gael Ard Fheis in Dublin.

The prospective plan is to swap the Promissory Note for a Government backed bond that will be due for repayment in 2025. This will give the Government some breathing space on time, but crucially will mean that the €3.1 billion can be used to help shore up the budget. That bond will also be used by the IBRC as collateral in seeking emergency loans from the Central Bank.

According to the Irish Independent the basic details of the deal are as follows as the more intricate details still need to be ironed out:

  • The €3.1bn debt due on March 31 will be deferred up to 2025.
  • The debt will technically be repaid. There will be no default.
  • There will be no net cost to the State.
  • The deal is estimatesd to save the taxpayer €80m in interest this year.
  • A new government bond, repayable in 2025, will be issued to cover the cost of the repayment.

While Irish Economy notes that a number of questions still need to be answered this is hopefully a good deal for Ireland. It will also hopeful spur on the Troika (EU, ECB and IMF) in renegotiating the overall debt of the bailout of Anglo Irish Bank and Irish Nationwide now known as the Irish Bank Resolution Corporation.

UPDATE: The Sunday Business Post have an excellent explanation of the deal

Author: Stephen

Cork born and bred, proud European and Irishman. Involved in many organisations and politics. Also writes for SpirtualityIreland.org and UCC Express.

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