ECB under pressure to cut deal on €31bn Anglo notes

The ECB said it was under “heavy time pressure” to reach a deal with the Government on the €31bn Anglo Irish promissory notes, raising hopes the annual €3bn burden on the taxpayer could be eased.

Sat, 15 Sep, 2012 - 01:00

Ann Cahill, Europe Correspondent, in Nicosia

But despite being praised for the way the country is managing its crisis, making cuts and increasing taxes, Michael Noonan cut no deal with fellow finance ministers during a meeting in Cyprus.

Instead he has proposed that discussions on theAnglo IOUs should take place directly between the Government and the ECB, rather than through the Troika.

At the same time talks will continue with fellow eurozone finance ministers on having the ESM, the EU’s rescue fund, buy the broke Irish banks for the €32bn the State poured into them.

Mr Noonan said the issue of the bank debt could be separated from the talks on the €31bn in promissory notes for Anglo Irish Bank.

Following the meeting Jorg Asmussen, ECB executive board member, confirmed there were discussions about the issue.

This follows on from what he described as “intense discussions” between the bank, the European Commission, the IMF and the Government, “to find possible avenues for the further enhancement of the well-performing programme”.

The Government is anxious to reach agreement on the promissory notes that would not see the cost put on to the State, adding to the debt and pushing it way above the 120% considered sustainable.

Mr Noonan said that if they can reach a deal with the ECB, it could then be endorsed by eurozone finance ministers. Thefinancing of the €31bn bank debt was separate and required just a political decision. But the government believes it cannot make progress on this until Spain requests funds for its banks.

Mr Noonan said: “Any arrangement which would have the direct recapitalisation of Spanish banks and applying that formula to Ireland is contingent on progress being made in Spain.”

This should become much more clear later this month when the report on exactly how much Spain’s banks need is published.