Rabbitte plays down Anglo €3bn note payment

A second minister has indicated the Government does not intend paying a €3bn Anglo promissory note due next year.

Communications Minister Pat Rabbitte said the Government could not afford to pay the IOU and that it was a deal agreed by the former administration.

In 2010, the Fianna Fáil-led administration agreed to pay €31bn to the now defunct Anglo Irish Bank and Irish Nationwide in promissory notes.

However, last March, Finance Minister Michael Noonan said the Government would defer payment of a €3.06bn note and instead meet the payment through a 13-year bond.

Mr Rabbitte said the Government will likely not pay out the €3.1bn note scheduled to be paid in March.

“We didn’t pay the promissory note this year and, as far as I’m concerned, we’re not going to pay it next year,” said Mr Rabbitte. “It’s as simple as that.

“We can’t pay. This was an IOU entered into by the previous government when the Anglo Irish Bank collapsed, and the notion of us paying it next March doesn’t arise.”

Mr Rabbitte said there would be difficult talks with the ECB on deferring payments, but that progress was expected before the due instalment.

“The ECB is a difficult institution to bring around to stamping the deal we need but I believe we will get that deal... before it falls due in March,” he said.

The Labour minister’s comments echo those by Transport Minister Leo Varadkar last week.

The Fine Gael minister said that he did not see why Ireland could not issue a bond in lieu of the payment once again.

“The payment is due at the end of March and certainly, in my view, we didn’t pay it last year and issued a bond to avoid paying it,” said Mr Varadkar. “I don’t see why we would pay it this year.”

Talks with the ECB on restructuring the promissory note payments are at an advanced stage, reports said yesterday. It is thought an arrangement could see payments stretched out over time, possibly up to 40 years. This would at least lessen pressure on the exchequer in the immediate years ahead.

Restructuring the interest on the payments could also ease pressure, especially next year, when the interest element will amount to some €1.9bn.

A deferral of interest payments could see the Government’s forecast budget deficit also fall from 7.5% to 6.4%,.

Any deferral of payments would also form part of a plan to help Ireland return to borrowing from the markets and therefor allow the country to exit the bailout programme.