Government and ECB move closer to deal on Anglo

Mon, Sep 17, 2012, 01:00

THE GOVERNMENT and the European Central Bank are advancing detailed talks on a deal to cut the cost of repaying the debts of Anglo Irish Bank.

A senior political source said yesterday that negotiators were close to an agreement to replace the €47 billion promissory note scheme through which the State pays off Anglo’s debts. Such notes are a form of IOU.

A number of complex technical questions remained to be settled, however, and sources on the Irish side were wary that the talks could yet hit another roadblock.

Minister for Finance Michael Noonan reported progress at the weekend, saying in Nicosia that the ECB was more eager than previously to move forward. “I believe at the end of the day we’ll get a deal. The quality of the deal is the issue. But we’ll keep working at it,” he said after EU talks.

“There seems to be willingness more than there was at the central bank to engage with us and they’re being pressed by many of our colleagues around Europe.”

Irish officials will continue the negotiation this week with their ECB counterparts.

Although some sources say a deal might be finalised by the end of the month, Mr Noonan said there was no deadline. The ECB’s willingness to strike a deal marks a change of stance as it had resisted moves to recast or replace the Anglo notes. “The mood music has changed. We are coming to an agreement,” the senior political source said. The source suggested that anxiety within the ECB that an Anglo deal might go further than its legal mandate allows has largely dissipated.

German ECB executive board member Jörg Asmussen was among the bank officials who met Mr Noonan in Nicosia. On Friday, Mr Asmussen said that negotiators were under “heavy time pressure”.

Mr Noonan said all parties were pursuing a “workable” arrangement. “There is very strong support now at political level for an arrangement for Ireland to make its debt more sustainable.”

IMF chief Christine Lagarde was among those who were supporting the Irish case, the Minister said. “I presume that some of the people that I spoke to, whose assistance I was recruiting, spoke informally to the ECB, and particularly Ms Lagarde.” At issue now is whether a formula can be found to satisfy the ECB, the Government and Anglo, now called Irish Bank Resolution Corporation.

There are three objectives: to reduce the financial burden on the State; to repay Anglo’s debts in full; and to enable IBRC to draw down ECB funding to meet its day-to-day obligations in a manner that does not run foul of EU law.

Minister of State for Finance Brian Hayes said there had been “substantial movement” in the ECB’s position and suggested the bank was taking a more proactive role under the leadership of Mario Draghi, who took charge last year.

He said that a debt relief package might be agreed on a phased basis, with the Government striking a deal first on the promissory note.