No deal yet on promissory notes

Tue, Mar 6, 2012, 00:00

No deal has been done on securing a restructuring of the Anglo Irish Bank promissory notes, Taoiseach Enda Kenny has said.

Mr Kenny was responding in the Dáil this afternoon to Fianna Fáil leader Micheál Martin who referred to media reports suggesting a deal on restructuring the €31 billion promissory notes for the former Anglo-Irish Bank was close to completion.

The Taoiseach said he was not going to heighten anybody’s expectations on the issue. “This is a really complex, difficult and sensitive issue,’’ he added.

Mr Kenny said that a great deal of intensive work and activity was going on surrounding greater flexibility for Ireland regarding the repayments to be made.

“So there is no timeline on this nor have I put a timeline on it because I cannot speak for governors of central banks of the euro zone or, indeed, for the other elements of the troika that are there,’’ he said.

Earlier today, a senior Irish official confirmed a revised deal on the promissory notes was in the pipeline and said the Government was also seeking a wider agreement on debt covering both Anglo and Irish Nationwide.

It is believed Ireland may be allowed to delay the €3.1 billion cash payment to this month as it works on a longer-term plan and issue another promissory note or government bond to cover the instalment.

Anglo Irish Bank was nationalised in 2009 and Irish Nationwide a year later as their loan losses soared following the collapse of the property sector. To avoid injecting cash immediately into the banks, the previous government pledged to give the money over more than a decade by issuing IOUs or promissory notes.

Under the current arrangements, the Government is contracted to pay an annual coupon of about 8 per cent to Anglo Irish (now the Irish Bank Resolution Corporation or IBRC) for the notes, which would cost about €48 billion by the time the notes are repaid. In addition, the Government must borrow or use tax revenues to make the annual €3.1 billion pay-down of the notes.

Any new plan to replace the promissory notes would have to be approved by all 27 EU Member states.

Speaking this morning, Minister for Communications Pat Rabbitte said any restructured agreement would be warmly welcomed.

"It would be hugely significant; It would be a psychological boost to the morale of the Irish people who are so aggrieved about what happened following the banking collapse," he said.

Mr Rabbitte added the Government has been "hopeful for some time" that the talks with Ireland's bailout partners on the issue would be successful. However, he stressed any deal was separate from the referendum.

"The stability treaty wasn't even a twinkle in Angela Merkel's eye when the Irish Government fed in their proposals for the restructure of our debt arrangements so there was no connection, and if there never was a stability treaty the discussions would have been under way," he said.

Ministers yesterday moved to distance themselves from comments made by Minister for Social Protection Joan Burton at the weekend in which she said a deal on bank debt would facilitate a Yes vote in the referendum.

Speaking in the Dáil this afternoon, Independent TD Shane Ross suggested the Government would surprise itself at how quickly it would come to the conclusion that it was time for a referendum when it announced, before the end of this month, that a deal on the promissory notes had been done.

The timing of the referendum was discussed at Cabinet today, but no final decision will be made.

Divergent views have emerged within the Cabinet about the best date to hold the crucial referendum on the fiscal treaty, with some Ministers maintaining a polling date in autumn would be preferable.

Mr Rabbitte said earlier today that although he favours holding the vote “before the summer recess”, it is “purely a mechanistic question”.

Several Government sources confirmed while the general thinking is to hold it earlier rather than later, some senior Ministers have not dismissed the merits of holding the poll after the summer break. One Minister said that Taoiseach Enda Kenny and Mr Noonan are among those who have yet to express a preference to colleagues and have left open the option of a later poll.

However, Mr Kenny told the Dáil no date had been fixed for the referendum as of yet.

The Taoiseach yesterday warned there will be no second referendum if the people vote against ratification.

Speaking in Castlebar, in his home constituency of Mayo yesterday, the Taoiseach said: “As this treaty does not require unanimity, therefore there is no veto involved here, so it’s a once-off. And when the Irish people make their choice, that’s it."

The publication of two opinion polls last weekend showing clear initial support for the Treaty strengthened the case for holding the referendum in late May or early June.

Additional reporting: Bloomberg