A complex deal to reschedule some of Ireland’s multi-billion bank bailout is being hailed as a success.
But what does it really mean?
A: They have wound up the Irish Bank Resolution Company (IBRC) – which used to be Anglo Irish Bank and Irish Nationwide – in a deal which they say could save the country one billion euro a year.
A: Well, Anglo left us with billions of euro in debts – 28 billion euro at the last count. So-called promissory notes – basically IOUs to the senior bondholders, mainly big institutional investors, who were owed the money – have been swapped for government bonds.
A: So, the Government said there is just 3% interest to be paid on the new long-term bonds, compared to the 8% on the promissory notes. And they do not have to be repaid until at least 2038, whereas we would be shelling out 3.1 billion euro every year under the old repayment scheme.
A: Not according to finance minister Michael Noonan. He said inflation would ensure that debt would be a lot more manageable when the time came around to pay it.
A: The Government says we will have to borrow 20 million euro less over the next decade. They have suggested this will mean less public spending cutbacks and less tax rises.
A: It now appears Project Red – that’s what the Government called their secret plan – was being plotted out for quite some time.
A: They did. But critics said the deal lets bond-holders off the hook, while younger generations in Ireland will have to pick up the tab in years to come.
A: In short we don’t know. And that’s because the finance officials in Dublin won’t show us their sums – we don’t know for sure how the bonds will be split up, and we don’t know when and how often interest rates will change. Still confused?