Sir, – Recent soundings suggest that the Government may not get its hoped-for deal on reducing Ireland’s socialised bank debt. But even if such a deal is announced, it will need to be treated with considerable scepticism. Based on the most recent evidence, the “deal” could well prove a sleight of hand that will end up costing us more in the long run.
Why? Because on March 31st Minister for Finance Michael Noonan pulled a stroke. He claimed to have done a deal to ensure that the €3.06 billion promissory note arising from the debts of the dead Anglo Irish Bank, and due for repayment that day, had been deferred. That note was not deferred, it was paid in full. The Government borrowed the money from Nama to do so. Nama later passed this debt onto Bank of Ireland and the Government’s IOU (or sovereign bond) is now held by the bank. Not only was this a scam, it was also a stitch-up because, whereas the promissory note payment could have been cancelled easily, a sovereign bond is “hard” debt that is more difficult to write down.
We learned the full cost of this deal courtesy of last week’s report from the Comptroller and Auditor General: “The level of Government bonds in issue increased in March 2012 when bonds were issued to meet a promissory note payment of €3.06 billion . . . the State issued bonds with a nominal value of €3.46 billion in order to meet the payment. The yield on the bonds and, therefore, the effective interest rate on the repayment of €3.06 billion, is just over 6.8 per cent.” So if Bank of Ireland, which is 85 per cent privately owned, holds onto this bond until it matures (in 2025) then it will make a profit of almost 7 per cent. Once again, public money is being channelled into the hands of private financiers. Some deal.
Much attention in recent days has focused on the alleged “stroke politics” practised by Minister for Health James Reilly regarding the location of primary care centres. But a much bigger stroke is being pulled with the promissory notes and it is one that will wreak infinitely greater and longer-term damage on Irish society. The Anglo: Not Our Debt campaign is demanding an end to these pseudo-deals and cancellation of this odious and illegitimate debt. – Yours, etc,