Debt deal is just jiggery pokery dressed up as a game changer
THE news that the State has secured a deal to push out Ireland's debt repayments represents a victory for the Government's – or more accurately the EU's – giant "delay and pray" strategy. The deal would see the repayment of a significant chunk of the €40bn troika loan pushed out for another 15 years. What we have executed is in effect a "gentleman's default". We won't pay what we said we'd pay and the creditors won't get what they expected to get and we'll see how we are all fixed after a dozen or so years. Let's look at the details to see what this means.
It appears that €10.5bn of EFSF/EFSM debts, which were due to be repaid in 2016, will now be kicked out to some future date. This will ease repayments. There was going to be a dramatic spike in the amount of money due in the next few years. With the economy fragile at best, there was no guarantee that the Irish State would manage to squeeze more cash out of us. From the EU's perspective, a fresh Irish bond crisis must be avoided at all costs. Yet a bond crisis may have been the most sensible outcome. Debts that can't be paid won't be paid.
Maybe it would have been more effective to recognise this now and extract a real concession on principle rather than postponing the problem for another few years – but more on that point later.