‘No debt writedown in promissory notes deal’

The Government is negotiating a restructuring of the €32bn in promissory notes that will be “very advantageous” to the Irish people, although this does not include any debt writedown, Central Bank Governor Patrick Honohan told the Oireachtas finance committee yesterday.

Mr Honohan said the priority was to secure a deal before the next €3.1bn promissory note payment at the end of March — echoing comments made by Taoiseach Enda Kenny and the finance minister.

Mr Honohan said he could not disclose too many details about the restructuring deal, other than it involved a significant lengthening of the time period over which the total amount has to be paid back and an adjustment of the interest rate.

As it stands, the Government is scheduled to make a €3.1bn payment every March until 2030 to cover the €47bn in principal plus interest payments relating to the promissory notes.

The Government is believed to be close to securing a deal whereby these payments will be wrapped up into a 30-40-year bond with a low interest rate.

Mr Honohan faced criticism from several members of the committee for not negotiating a writedown of the €28.1bn. He said any deal had to be done within the existing legal framework. “The ECB is not in the business of giving grants,” he said.

“Taking into account both the statutory position and wider policy stance of the ECB, an initiative of this type will be novel and as such, challenging.

“Using our knowledge of Central Bank law and practice, we have been working to build understanding and confidence around a set of proposed transactions designed to deliver for Ireland, while not taking other decision-makers too far outside their comfort zone.”

Mr Honohan said it was not possible to stop making the yearly payment to the ECB because there could “be dire consequences”. He said he didn’t want to speculate on what retaliatory measures the ECB could take but he pointed out the institution extends a huge amount of cheap funding to the Irish pillar banks at low rates.

Moreover, it is important that Ireland retains the confidence of the markets if the economy is to make a full recovery.

© Irish Examiner Ltd. All rights reserved

Related Articles

Irish Examiner' />Economic prospects - Guarded optimism

Irish Examiner' />Honohan: Banks too slow on arrears

More in this Section

‘Pay caps hamper recruitment’ according to Central Bank deputy governor

Eurozone's Single Resolution Fund may face month delay

Quinn Insurance collapse to cost another €912m

Women in business honoured by UCC's Alumni Achievement Awards

You might also like

Breaking Stories

More than €4bn expected to be spent on Cyber Monday

Amazon beats record sales on Black Friday

You won't believe how much cash shoppers are expected to splash by the end of Cyber Monday


BIG READ: Sexism and fear keeping women away from Hollywood's top jobs

Eat your way to an illness free winter

Butt out when Dad’s in charge and let him do it his way

5 tips for a seamless desk-to-dance floor transformation this festive season

More From The Irish Examiner