Goodbody says 'prom note' lift only €10bn not claimed €20bn
THE funding benefit to the State from the promissory note deal will be half what the Government claimed, a leading stockbroker has estimated.
Taoiseach Enda Kenny and Finance Minister Michael Noonan said the debt deal struck last week would mean the State would have to borrow €20bn less over the next decade.
Goodbody Stockbrokers said that while the figure is correct in gross terms, certain aspects must also be factored in.
Economist Dermot O'Leary estimated that under the deal, about €6.5bn of Irish debt would be sold from the Central Bank to the open market. This means that there will be more Government bonds in circulation, which could limit the appetite for international investors to lend Ireland money on the open markets for day-to-day spending.
"That must be added on in terms of the funding that needs to be done for Ireland Inc, over the next decade," he said.
"The NTMA didn't take account of that."
He and colleague Juliet Tennent also said that under the previous promissory note agreement, €10bn was estimated to have been returned to the state.
But given the lower interest on the newly issued Government bonds and the fact that some of the payments will flow to private investors, Goodbody estimated that the Central Bank surplus income will amount to about €6bn.
"I think the numbers that were given are strictly correct on a gross basis, but we're saying that you have to take account of these other offsets," Mr O'Leary said.
"It probably has been overlooked somewhat."