Noonan seeks ECB backing for deal

Fri, Mar 30, 2012, 01:00

Minister for Finance Michael Noonan said the “priority” in his campaign to ease Ireland’s bank debt burden is to secure European Central Bank support for a new rescue plan.

The Government wants to replace the €47.billion Anglo Irish Bank promissory note scheme with cheaper, longer loans backed by the temporary European Financial Stability Facility bailout fund or the permanent European Stability Mechanism.

Mr Noonan was in Copenhagen today for meetings with his European counterparts, at which it was agreed to cap overall euro zone rescue lending at €800 billion. The talks followed the deferral of a €3.06 billion promissory note payment due by the Government this weekend.

Mr Noonan acknowledged that German support for a broader initiative to ease the burden of the bank debt will be important but said the stance adopted by the ECB would be the key element in the negotiation.  In question is whether the ECB agrees to provide low-cost funding into the “medium-term” as part of a new arrangement to replace the promissory notes.

Following the deferral deal, an ECB spokesman said it still expects that the future promissory note payments “will be served according to the schedule to which the Government has committed itself.”

However, Mr Noonan said this came as no surprise. “They say they expect Ireland to pay on schedule in the coming years,” he told reporters. “But they also know that the European authorities and the IMF are preparing a policy paper where they’re exploring the possibility of an alternative to the promissory note being found which would enable Ireland to have a less onerous method of repayment and we’re moving onto that now.” 

Mr Noonan told the Dáil yesterday the Government had won agreement from European institutions to defer the payment on promissory notes due tomorrow. The payment will be covered by way of a long-term Government bond being issued to the former Anglo. It will in turn swap the bond for cash in a transaction with Bank of Ireland to settle tomorrow’s repayment.

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