Govt seeks Anglo liquidation in debt deal
The Government is awaiting agreement from the European Central Bank to liquidate the former Anglo Irish Bank as part of a deal on the bank’s promissory notes.
The Dáil and Seanad have even been put on standby having being told to expect special legislation from the Department of Finance tonight.
It is understood the Government’s liquidation plan will see IBRC assets transfer to the National Asset Management Agency (Nama).
Patrick Honohan, governor of the Central Bank, has opened negotiations in Frankfurt with his counterparts and ECB banking chiefs over plans to dispose of the toxic lender, where a decision could be rubber-stamped tomorrow.
If that needs to be signed by President Michael D Higgins before tomorrow, he is currently on an official visit to Rome, raising the prospect the Government jet may have to be scrambled to bring him home.
It is understood the proposed replacement bond would run for 30 to 40 years.
The thinking behind the proposal would be to give the Irish State more time to pay off the debt, thus reducing the cost of the principal sum.
According to finance officials, it is a more manageable approach, albeit with longer and potentially bigger interest repayments.
In order for the plan to go through, Cabinet will have to meet tonight and special legislation be enacted.
One of the major sticking points in efforts to strike a debt deal has been the ECB's reluctance to be seen to be financing individual EU member states.
It also does not want to set a precedent for granting a deal on bank debt.
The bank, favoured by property speculators and developers before the 2008 crash and since rebranded the Irish Bank Resolution Corporation (IBRC), has cost the State €28bn.
It is understood that as part of this, a restructuring of the Irish Bank Resolution Corporation would be needed and that would require special legislation to go through the Oireachtas.
This is necessary so that the toxic institution that is being wound down would return to being a functional bank with a licence, allowing for the issuance of a long-term bond.
Government sources claimed the plan, if accepted by the ECB, would be “very advantageous” for Ireland.
The Coalition has been battling with European leaders and officials in Brussels and Frankfurt since taking power in early 2011 to cut the cost of the country’s bank bailout.
A reduction in the €47.4bn cost of rescuing Anglo and Irish Nationwide in the original promissory note agreement has been the Government’s aim since it came into power two years ago.
A €3.1bn promissory note payment in March, one of many that it has to pay each year until 2023 to underwrite Anglo, has been the immediate focus for the Government.
