Govt hopeful of deal on delaying Anglo payment
The Government is hopeful of reaching a deal with the European Central Bank today to effectively delay the payment of over €3bn of bank debt to Anglo Irish Bank.
Discussions have been ongoing in recent months to strike a deal with the Troika to restructure or reduce the debt, worth some €31bn in total.
Bloomberg news last night reported that Central Bank Governor Patrick Honohan is to ask the ECB today for permission to effectively delay a cash payment on the Anglo promissory note due at the end of this month.
Finance Minister Michael Noonan told the Dáil yesterday evening that there had been a development in talks during the day.
"The discussions with the European authorities on the general issue continue, but we are now negotiating with the EU authorities, and principally with the ECB, on the basis that the €3.06bn cash instalment due from the minister to IBRC on Mar 31, 2012, under the terms of the IBRC promissory note could be settled by the delivery of a long-term Irish Government bond," the Finance Minister said.
"The details of the arrangement have still to be worked out."
While the money would still be owed, payment would be deferred until a later date.
This would give the Government time to conclude the negotiations with the troika on the overall cost of the Anglo-Irish Nationwide bailout.
The bailout of the two financial institutions, now merged and known as the Irish Bank Resolution Corp, cost €30.6bn.
The Government funded this through a promissory note system — also a form of IOU.
The promissory notes, along with interest totalling €16.8bn, are due to be paid off over a 20-year period, meaning the total cost of the bailout will be €47.4bn unless the troika agrees to a cheaper alternative.
The €3.1bn due on Mar 31 represented the portion of the €47.4bn meant for repayment this year.
The matter will be discussed further today when Governor Honohan meets with his colleagues on the governing council of the ECB.
Economist Constantin Gurdgiev said not much is known about any potential deal at this point.
"At this stage we have more questions than answers about the deal so we have to wait and see when the actual details come out," he said.
"What we do know so far is that this really concerns the 2012 payment of the loan.
"If that is the case then there is really no material change, to either our debt levels or to the burden of repayment."
Fianna Fáil's Michael McGrath welcomed the development as offering the possibility of "breathing space" to conclude a comprehensive settlement.
“The postponement of the payment would give Ireland some breathing space to conclude a comprehensive settlement on the banking debt," Deputy McGrath said.
"In those negotiations, I believe the Government’s objective should be to secure a reduction in the actual burden of bank-related debt."
Sinn Féin Finance spokesperson Pearse Doherty meanwhile called on the Government to "provide more detail on the arrangement being proposed so that the public can judge the actual impact of the arrangement on the public finances."
"Any reduction in the state’s liability to the payment of this debt to Anglo Irish Bank would be a welcome one," Deputy Doherty said.
However he said the announcement by Minister Noonan was "very vague".
"It appears that what the Government has succeeded in doing is replacing a promissory note to Anglo Irish Bank with a sovereign government bond to Anglo Irish Bank," Deputy Doherty said.
“If this is the case it will not reduce our debt levels and we will still be liable to pay the full €31bn to Anglo Irish bank at a future date.
“While this arrangement may have some short term benefits, what is needed and what Sinn Féin has consistently demanded is for this debt to be written down.
