IMF notes 'consensus' on Anglo debt

The IMF has suggested a restructuring of the Anglo Irish Bank promissory notes would improve Ireland’s debt sustainability and help its return to the bond markets.

The Government aims to return to long term debt markets later this year to help it prepare for the ending of official funding next year and meet borrowing needs of about €20 billion in 2014.

The Government is seeking to restructure about €30 billion of promissory notes, or IOUs, used to rescue the former Anglo Irish Bank, which has been renamed the Irish Bank Resolution Corporation.

The IMF, one of the troika along with the EU and ECB that provided Ireland with an €85 billion bailout in 2010, said it was reasonable to expect that Ireland could achieve the modest market financing planned for this year through selling short-term treasury bills.

However it reiterated a call for extra European help to back Irish plans for a full return to bond markets next year for the first time since September 2010.

Minister Finance Michael Noonan has said re-engineering Anglo's promissory notes over 30 years at "more favourable rates" would lead to a "serious reduction" in the country's debt burden.

Ireland's bailout partners have developed "a lot of consensus" on tackling the cost of the Anglo Irish Bank bailout, an International Monetary Fund official said today.

"It is still a work in progress," IMF deputy mission chief to Ireland Craig Beaumont said in a conference call with reporters today. "But fundamentally the underlying concept has attracted a lot of consensus."

Mr Beaumont said an accord on the notes would "reinforce" Ireland's debt sustainability. He said the risks to market re-entry next year "are a little on the high side" and he would like to see them reduced.

Ireland has committed to repaying €3 billion a year for at least a decade to pay off the cost of the collapse of Anglo.

Ireland's performance has been held up by European leaders as a glowing example of how their plans to fight the euro zone debt crisis are working and the IMF said once more that Dublin's policy implementation remained strong.

However, with weaker exports and a larger than expected decline in consumption weighing on Ireland's economy, it said the challenges were greater than envisaged at the outset of the bailout programme.

As a result, the IMF, like the European Commission, sees Irish gross domestic product (GDP) growth slowing to 0.5 per cent this year, significantly lower than the 1.3 per cent forecast by the Government.

"The IMF said Ireland remained on target to reduce its budget deficit to 8.6 per cent of GDP and again urged the Government not to ramp up its austerity plans for this year, even if there is a further reduction in growth projections.

Meanwhile, the Government has moved to quash suggestions from within Cabinet that Europe should cut the cost of Ireland’s bank debt burden to boost support for the fiscal treaty referendum.

Senior European officials are very sceptical that the Government would receive any concession on the Anglo notes if it did push for a quid-pro-quo during the referendum campaign.

While officials within the EU-IMF troika see merit in the Government’s push for a concession, Germany remains opposed.