Noonan: Deal ‘best possible outcome’

This deal on restructuring the €31bn promissory note was the best possible outcome for the country, Finance Minister Michael Noonan told the media yesterday evening.

He said the Government did not ask for a debt writedown: “The ECB does not give debt writedowns. We did not ask for what we couldn’t achieve.” And he rejected criticism that the overall stock of debt does not change because of this deal.

“I paid €3,200 for my house in 1968. When I paid my last mortgage payment 25 years later, my monthly teacher’s salary would have paid for my entire mortgage. That is what inflation does to debt,” he said.

According to the terms agreed with the ECB, the average maturity on the government bonds issued to replace the promissory notes is 34.5 years.

The average maturity on the length of time these bonds will be held with the Central Bank will be 14-15 years.

Mr Noonan said that as long as the bonds were held by the Central Bank, the interest rate payments on these bonds would return to the exchequer. “We don’t reduce the level of debt. But what we do is reduce the amount we have to borrow over the next decade by €20bn.”

The costs of liquidating IBRC will reach between €900m and €1.1bn — mainly through the activation of the eligible liabilities guarantee scheme. Consequently, there will be no net savings to the State this year. However, lower interest rate payments over the next two years will save on average €1bn each year.

Mr Noonan declined to say what implications this will have for the next two budgets.

Brendan Howlin, the minister for public expenditure, said this deal would not affect the Croke Park Agreement. “We are very conscious that we have other steps to take. There are still very significant challenges ahead.”

However, there would have been a “moral issue” if the Government had failed to reach a bank debt deal, which would have made negotiations much harder, he added.

Mr Noonan said it was essential the Government liquidated IBRC as part of this deal. The original intention was that the legislation needed to facilitate the immediate winddown of the bank would be passed in the same Dáil session as the deal was announced.

However, as soon as details of the leak was announced on Wednesday, it was essential that the emergency legislation was passed immediately to protect the interests of the taxpayers — even though agreement had not yet been reached with the ECB.

Picture: Finance Minister Michael Noonan at the press conference after the announcement that a deal has been reached with the ECB. Picture: Photocall Ireland