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Noonan: Progress on bank debt deal
The ECB will be happy to swap the €31bn of promissory notes, reducing the debt burden on taxpayers, if the right deal can be made, sources in Frankfurt say.
By Ann Cahill, Europe Correspondent
The ECB will be happy to swap the €31bn of promissory notes, reducing the debt burden on taxpayers, if the right deal can be made, sources in Frankfurt say. Following a 90-minute meeting with ECB president Mario Draghi, Finance Minister Michael Noonan said he was “making progress” on restructuring the cost of the €64bn bank debt.
As well as plans to spread the cost of the Anglo promissory notes over decades and halve the interest rate, Mr Noonan is seeking the best deal on the €24bn of Irish money put into AIB, Bank of Ireland, and Permanent TSB. This could take a year because of delays in setting up the EU’s bailout fund, the ESM, and waiting for the German constitutional court to rule on the challenge. However, it would not mean a second bailout, said ECB executive board member Jorg Asmussen.
These measures would take at least 10% debt off the Government’s books, cut the repayments that threaten Ireland’s recovery, and ease a return to the markets.
Mr Noonan is trying to reduce six or seven options to those most suitable and likely to get the full backing of the ECB and his fellow eurozone finance ministers.
Government officials and the troika need to have a jointly agreed submission ready in September for approval by the ministers the following month.
A development in Ireland’s favour is the change Mr Draghi indicated last week in the ECB’s policy that, in future, senior unsecured debt-holders in banks that are being shut should be forced to take losses.
While it is too late for Ireland to benefit from such a change, as just about €160m is now held by unsecured bondholders in Anglo and Irish Nationwide, Mr Noonan is confident it would strengthen his case for better terms.
Ireland could also benefit from mixed news from Portugal and Greece, the other two countries in a bailout programme: There are fears Portugal will not meet its targets later in the year, while Greece has fallen far behind in its programme.
The ECB and the European Commission are anxious for a “success” . While Mr Asmussen said he did not expect “any great decisions” at yesterday’s meeting, they would work on finding a similar solution to that for Spain over the second half of the year.
The ECB has long been unhappy at the Anglo IOUs, as it is holding them in exchange for liquidity for the banks. It would much prefer to have bonds from the EU’s bailout fund instead.
However, the process is complex and the Government is anxious to get the best deal but also to take it off Ireland’s debt balance.
The second half of the deal, replacing the €24bn paid mainly from the pension reserve for the pillar banks, should be agreed in October, but it could be mid-2013 before the ESM, from which the money will come, is functional.
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