Just over €28bn in outstanding aid is to be pumped into the Irish Bank Resolution Corporation (IBRC) over the next 20 years through the execution of promissory note payments; aimed at the state covering the outstanding Central Bank debt that the failed bank owes in backdated “exceptional liquidity assistance” loans.
The first €3.1bn tranche was paid out to the IBRC last March and another €3.1bn payment is due to be paid at the end of next month.
Appearing before yesterday’s sitting of the Oireachtas joint committee on finance, public expenditure and reform; economics professors Karl Whelan of UCD, Brian Lucey of Trinity College Dublin and Stephen Kinsella of the University of Limerick put forward a number of options, including a restructuring of the current payment agreement and a deferral of payments.
“There are technical possibilities here that should be explored; once we get locked into a schedule of payments, it would be very difficult to alter it,” Mr Lucey said. “It would be better for Ireland to use this money more productively than to waste it, by basically burning it.”
Mr Whelan said that Ireland may have avoided the bail-out by the EU/IMF/ECB troika had it not been for the IBRC liabilities. He also noted that, without the promissory notes, the IBRC would still have sufficient assets to pay off deposits, bondholders and eurosystem loans; leaving only its exceptional liquidity assistance loans — albeit valued at over €42bn.
“The Government should be proposing to restructure the notes, so that there is no €3.1bn payment to IBRC on March 31, or for a number of years after that,” Mr Whelan said. “This would reduce the state’s funding requirements over the next few years and, by reducing the net present value burden of this debt, help to convince investors that Ireland’s 120% debt-to-GDP ratio isn’t as onerous as it looks.
“The key question is whether the members of the ECB Governing Council [which can block any restructuring] are willing to lower the burden on the Irish people, due to their Government’s decision to take over the liabilities of Anglo and Irish Nationwide and ensure that its depositors and senior bondholders were repaid.”
While there is little evidence of ECB approval for any payment restructuring plans, former Anglo chairman Alan Dukes said earlier this week that there is a good possibility of the Government reaching agreement on reducing the cost of the notes to the state.