NAMA's €54bn purchases won't be counted as national debt
Wednesday October 21 2009
THE €54bn being used to purchase the development loans of Irish banks will not count as government debt under EU rules, according to a preliminary decision from the European Commission's statistical service Eurostat.
The ruling came as a new survey found that a majority of Irish businesses believe that the National Asset Management Agency (NAMA) is the right way forward while a further 62pc expect its introduction will have a positive effect on lending.
According to the KBC Ireland/Chartered Accountants Ireland autumn business sentiment survey, while 27pc of respondents said they did not know whether NAMA was the right approach to help heal the banking sector, more than three times as many thought it was the way forward.
"This fairly clear result may tell us that business takes a more positive view on NAMA than many commentators," said Austin Hughes, chief economist at KBC Bank of Ireland.
The EU approval for not counting the NAMA purchases depends on the complex terms of the National Assets Management Agency (NAMA) legislation being passed. A "special purpose vehicle" (SPV) with majority private capital will technically hold the loans. However, the SPV will have capital of just €100m and NAMA will retain effective control and a veto on decision making
EU rules say general government debt should not exceed 60pc of output (GDP) and the annual deficit should be below 3pc of GDP.
The Government plans to achieve the deficit target by 2013, although debt will still be 75pc of GDP by then. The €54bn being paid by NAMA would have brought the debt ratio to around 105pc next year, had it been counted. .
Finance Minister Brian Lenihan welcomed the preliminary ruling, but said that it did not change the fact that NAMA would increase the State's potential liabilities.
"The operations of NAMA will be treated in a similar way to the French scheme, which also uses a special purpose vehicle with majority private ownership," he said.
A Fine Gael spokesman said it was just a technical decision and it would still be taxpayers who gave to bear any losses. "In no way will this reduce the huge and unnecessary level of risk posed by NAMA to the public finances," he said.
- Brendan Keenan
Irish Independent
