ECB chief dismisses promissory notes deal

ECB president Mario Draghi has made a withering reference to Ireland and the efforts to swap the Anglo Irish Bank promissory notes for more affordable funding.

It was the latest in aseries of references suggesting talks between the Government and the ECB on easing the annual cost of at least €3bn on the taxpayer are not going smoothly. Mr Draghi was told by Fine Gael MEP Gary Mitchell that Ireland had done the heavy lifting involving 70% of the troubled bank debts but needed help with the rest.

Mr Mitchell said the work would be done, but that it was getting more difficult. “We are now carrying things on the national balance sheet that we should not be carrying. We are hindering the very difficult measures being taken to bring cashflow under control by not rescheduling the promissory notes,” he said.

He told Mr Draghi: “It is time to move on the promissory notes and divide what should be on the national balance sheet and on the debt GDP.”

At first Mr Draghi’s response was an appreciation of the “significant progress on policy reform taken in extraordinary conditions by the Irish government”.

But then Mr Draghi made his point of view on the issue quite clear. “There is a specific issue that is being discussed and over the past few months, desire of all parties to find a solution but the ECB cannot undertake monetary financing and cannot replace what other member states can do, and that is true for Ireland and other cases.

“It’s too easy to think the ECB can replace government action or lack of it, but printing money is something that is not going to happen.”

Finance Minister Michael Noonan, commenting on Mr Draghi’s remarks, agreed the ECB could not be involved in monetary financing or quantitative easing, and that was the background against which they were negotiating.

“There is plenty of room for negotiations without getting into monetary financing — he has not changed the ground rules in any way and has not made it harder or easier,” Mr Noonan said.

Mr Draghi said any possible rescheduling of the €31bn put into banks by the Government must wait until the banking supervisor is in place. He indicated this might not happen until the end of 2013.