Irish Economy: Taoiseach Enda Kenny today
announced in the Dáil, a deal with the European Central Bank to restructure the promissory
note debt in respect of the failed Anglo Irish Bank and Irish Nationwide
Building Society, by extending maturity on the debt of €28bn excluding interest
to 40 years.
The promissory notes are being exchanged for
longer term bonds with the first maturing in 2038 and the last in 2053. There
will be a €20bn reduction in the borrowing requirement of the NTMA (National
Treasury Management Agency) in the coming years.
Kenny said as a result of the deal, tax increases
and spending cuts will be €1bn lower each year.
The liquidation of IBRC, the renamed Anglo Irish
Bank, resulted in the Central Bank taking full ownership of the €25bn in the
promissory notes and other collateral held as security for the funds provided by
the Central Bank to the IBRC.
Last rites read for Anglo Irish Bank - - the damned builders' bank
"The average interest rate on the new bonds will begin at just over 3%, compared
with an interest rate of well over 8% on the promissory notes.
This will result in a reduction in the State’s
General Government deficit of approximately €1bn per annum over the coming
years, which will bring us €1bn closer to attaining our 3% deficit target by
2015. This means that the expenditure reductions and tax increases will be of
the order of €1bn less to meet the 3% deficit target.
This plan will lead to a substantial improvement
in the State’s debt position over time."
However, the amount of the interest savings is
subject to question as some of the planned interest payments on the notes would
be received by the Exchequer in the form of Central Bank annual profit
|Mario Draghi, ECB president, at a press conference in Frankfurt today, looking exasperated as he listens to another question on the Anglo deal, where he says the governing council 'took note' of the agreement between the Irish Government and the Irish Central Bank on the promissory note debt ex-interest of €28bn. |
"Even as the lower interest rates resulting with this agreement reduce Ireland’s
deficit, a very large and unsustainable gap between Government revenues and
spending remains to be fixed – a gap unrelated to our banking crisis. Only we in
Ireland can fix this problem by reforming the way our State and country works.
We continue to negotiate to improve other core
elements of the onerous bail-out deal inherited from the previous Government.
Today, we have secured a vastly better deal on the cost of bailing out Anglo
Irish Bank and Irish Nationwide. Tomorrow we continue our efforts to seek
European assistance to recover as much taxpayers’ money as possible from the
other financial institutions bailed out by the State."
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