Bank deal promises are pie in the sky

BY regularly raising hopes of getting a better deal on bank debt only to let us down again, the Government is losing all credibility on its ability to deal with the issue.

Both Fine Gael and Labour swept into power last year on bold promises to reduce the crippling burden shouldered on taxpayers as a result of a catastrophic decision by the Fianna Fáil government to guarantee the banks.

But as they settled into their seats of power, the best the Coalition could manage was to seek comfort in blaming its predecessors while avoiding the reality that it too has failed in the task entrusted to it by voters.

The latest hope-raising exercise came on the day of the yes vote on the EU fiscal compact referendum, when the Taoiseach boasted he had phoned Angela Merkel to discuss a better bank deal.

Brave on rhetoric but scant on detail, the Taoiseach later refused to divulge the exact response of the German chancellor.

Under persistent questioning in the Dáil from the Fianna Fáil leader, Mr Kenny would only answer: “I did not give the chancellor the opportunity to say we had inherited an unprecedented mess left behind by the government of which Deputy Micheál Martin was a member.”

Mr Kenny told the Dáil last Wednesday he had written to other EU leaders as part of efforts to seek a euro-wide solution to the banking crisis. We do not know what specifically he requested in this letter, or during his phone call to Ms Merkel, or what answers, if any, he received.

In recent weeks, the Government has been hoping it could piggyback on any deal that would see Spanish banks directly re-capitalised by EU rescue funds.

The Spanish deal agreed at the weekend, which involves re-capitalising the banks through loans rooted through the Spanish sovereign, represents a setback for any such hopes.

Instead, the Government says it will continue to pursue the issue of re-organising the promissory note system which involves payments of €3.1bn a year to Anglo over the next 15 years to help it repay bailout money to the Central Bank.

Unfortunately, progress on the promissory notes has been slow and the status of negotiations with EU partners on the issue has been less than transparent.

This week last year, Finance Minister Michael Noonan said he planned to burn the bondholders who lent to Anglo.

But since this was shot down by the troika, he has had to rely on the promissory notes avenue as a way of reducing bank debt.

He first mentioned the promissory notes at the Oireachtas Finance Committee in September of last year.

“I have not raised the issue in specific terms with any of the authorities yet, but I have raised it in general terms with the troika — pointing out the difficulty of meeting the €3bn payment every year and what it does to the fiscal figures,” he told Sinn Féin’s Pearse Doherty.

He said he did not want to go to European authorities simply to “kick the ball around”, but would like to present them with a proposition. But he warned: “I do not know whether we will arrive at a solution.”

Three weeks later, on Sept 17, Mr Noonan travelled to Poland for a meeting with the then ECB president, Jean-Claude Trichet, and Economics Commissioner Olli Rehn.

Mr Noonan told the Irish Examiner he hoped to convince them to lower the interest rate or lengthen the repayment period of the notes. Ireland would get a “much bigger advantage” from changing the promissory notes than by pursing the bond issue,” he said.

Speaking after that meeting, he said the ECB had been “pretty non-committal” but had “agreed that we could access some of [its] technical people if we were trying to design something”.

By November, when it came to paying back €1bn to Anglo bondholders, Mr Noonan used the prospect of promissory note discussions to convince the public he was doing the right thing.

On Nov 22, Richard Boyd Barrett of the United Left Alliance asked the Taoiseach if the issue had been raised with Ms Merkel at a recent EU meeting.

Mr Kenny simply responded “yes”. We heard little of the promissory notes again until it was announced in March that a referendum would be held on the EU fiscal compact.

This came just weeks before a €3.1bn promissory note payment was due, and led to suggestions that a yes vote should be linked to a restructuring of the notes.

During leaders’ questions on Mar 14, Mr Kenny was asked if the payment would be made in full and asked to explain the status of talks with the ECB.

“I am not going to tell the House the particular issues that arise or the nature of the discussions taking place because the negotiations are far too sensitive and technical, and they are very complex,” he said.

At the end of March, the Government announced it would issue a bond instead of using cash to meet the March promissory note payment.

The measure fell far short of the sort of restructuring that was promised, but Mr Noonan again held out hope. He said the agreement to use the bond was a signal from the troika that the promissory note system was not “set in stone”.

It is now June and we still do not know what progress is being made, what Germany thinks of it or if other EU leaders have been asked for their support.

The Department of Finance said it does not have a timeframe for when the technical paper on the issue will be completed by the troika.

Junior Finance Minister Brian Hayes said yesterday it will be published “in due course”. European Affairs Minister Lucinda Creighton is confident an agreement could be reached by autumn. How many more times can the Government raise our expectations of a deal while failing to provide any evidence that the talks are going anywhere?