Noonan hopes to settle €3.1bn Anglo payout with bond

Government hopes have risen that it can avoid having to fork out €3.1bn in cash to Anglo at the end of the month.

Finance Minister Michael Noonan last night signalled that the Coalition was on the verge of a breakthrough in its ongoing negotiations with the troika of ECB, EU and IMF.

With the Mar 31 repayment date looming, Mr Noonan said his hope was to settle the €3.1bn due by way of a Government bond — essentially an IOU — rather than cash.

While the money would still be owed, payment would be deferred until a later date.

This would give the Government time to conclude the negotiations with the troika on the overall cost of the Anglo-Irish Nationwide bailout.

The bailout of the two financial institutions, now merged and known as the Irish Bank Resolution Corp, cost €30.6bn.

The Government funded this through a promissory note system — also a form of IOU.

The promissory notes, along with interest totalling €16.8bn, are due to be paid off over a 20-year period, meaning the total cost of the bailout will be €47.4bn unless the troika agrees to a cheaper alternative.

The €3.1bn due on Mar 31 represented the portion of the €47.4bn meant for repayment this year.

Government hopes of deferring the cash payment appeared to be dashed earlier this month when European Commission vice-president Olli Rehn stated bluntly that he expected Ireland to meet its commitments.

But last night, Mr Noonan told the Dáil there had been “developments” on the issue earlier in the day.

He said: “The discussions with the European authorities on the general issue continue, but we are now negotiating with the EU authorities, and principally with the ECB, on the basis that the €3.06bn cash instalment due from the minister to IBRC on Mar 31, 2012, under the terms of the IBRC promissory note could be settled by the delivery of a long-term Irish Government bond. The details of the arrangement have still to be worked out.”

The matter will be discussed further today when Central Bank Governor Patrick Honohan meets with his colleagues on the governing council of the ECB.

But an ECB agreement on the €3.1bn payment method would give the Government significant breathing space ahead of the referendum on the fiscal compact treaty.

Sinn Féin last night described as a “blackmail clause” the condition in the treaty that prevents access to the EU’s future bailout fund for those countries which have not ratified it.

But Mr Noonan said it was “entirely logical and reasonable” that a country receiving support from its partners under the bailout fund would be “prepared to run sensible budgetary policies” as laid down in the treaty.