Monday 19 August 2019

Gabriel Makhlouf to speak about New Zealand budget leak before he takes up new role as Irish Central Bank governor

Gabriel Makhlouf will take up his role as Central Bank governor on September 1 under a cloud of controversy. Photo: Vivek Prakash/Bloomberg
Gabriel Makhlouf will take up his role as Central Bank governor on September 1 under a cloud of controversy. Photo: Vivek Prakash/Bloomberg
Donal O'Donovan

Donal O'Donovan

Incoming Central Bank of Ireland Governor Gabriel Makhlouf will make a statement about his controversial handling of a New Zealand budget leak before he takes up his new role in September, Minister for Finance Paschal Donohoe has said.

A New Zealand investigation last week stopped short of formally reprimanding Mr Makhlouf for wrongly claiming that a massive cyber attack on the Treasury led to that country's budget being leaked. In fact, the information had unwittingly been made available to the public.

Those events kicked off a major controversy in New Zealand, damaging Mr Makhlouf’s reputation just weeks after he was selected by the Finance Minister to head up the Central Bank here. Last week, Taoiseach Leo Varadkar said he expected Mr Makhlouf to make a statement about his role in the controversy before taking up his job at the Central Bank.

Mr Donohoe was speaking at the launch of the National Treasury Management Agency (NTMA) annual report in Dublin.

That report shows the cost of servicing the national debt will be €3bn less next year than it was at its peak in 2014, even though the overall debt is higher.

The NTMA says the interest bill for the State will fall to €4.5bn next year, from an expected €5bn this year. In 2014, €7.5bn of tax income went on debt interest. Borrowing costs for eurozone countries, including Ireland, have fallen to record lows this year, boosted by expectations the ECB will continue to prop up the market.

However, NTMA chief executive Conor O'Kelly warned that Ireland’s debt levels remain high, creating significant exposure to rising interest rates in the medium term, even though some large debt repayments - dubbed chimneys - had been refinanced at lower costs.

“As we look past Ireland’s unusually high refinancing requirements or “chimneys” out to 2020, we must remain conscious of the challenges ahead, including the risks arising from Ireland’s elevated debt levels," Mr O'Kelly said.

At the same event, Mr O’Kelly said that the NTMA – and taxpayers – will not be on the hook for any losses associated with the huge €14bn Apple tax payment ordered by the EU. The money is being held in a so-called escrow account, pending the outcome of challenges from Apple and the Irish Government to a ruling that the alleged back taxes had to be collected.

The money has been invested in low-risk, highly-rated euro-dominated fixed bonds, predominantly short to medium-term sovereign and quasi-sovereign bonds, the NTMA said.

Bond market returns are so low at the moment that such investments are likely to be losing money.

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