Irish

Friday 25 July 2014

ECB: 'Promissory note deal and IBRC liquidation raise serious concerns'

Donal O'Donovan

Published 07/04/2014|12:17

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Mario Draghi, President of the European Central Bank, which didn't cut interest rates despite inflation hitting a four-year low
Mario Draghi, President of the European Central Bank, which didn't cut interest rates despite inflation hitting a four-year low

THE deal allowing Ireland to replace the so called Anglo Irish Bank promissory notes with easier to manage long term debt raised concerns at the European Central bank (ECB) about so called “monetary financing.”

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The ECB is barred from “monetary funding” – which simply means lending directly to Governments, but under the deal to tear-up the former Anglo Irish Bank’s debt to the Central Bank here the State stepped in, replacing the old Note with €25bn of new Government bonds.

In its annual report, the ECB said that the deal “raises serious financing concerns.”

Given that these issues were well understood in advance of the February 2013 deal, it is unlikely the new report will cause any problems.

The bonds are held by the Central Bank of Ireland, but it must sell them on to private investors as soon as practicable – including a minimum disposal of €500m of the bonds this year.

In its report the ECB said rules prohibiting monetary financing “were in general respected” across the euro region, “the liquidation of the Irish Bank Resolution Corp (IBRC) raises serious monetary transactions.”

“These concerns could be somewhat mitigated by the disposal strategy,” the report said.

 

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