Tuesday 12 December 2017

Anglo debt deal: ECB’s Mario Draghi says bank to examine further promissory note swap

ECB President Mario Draghi
ECB President Mario Draghi

By Ailish O’Hora

THE European Central Bank’s Mario Draghi said today that the institution will examine further the Anglo debt deal on the promissory note.

The examination comes after German ECB governing council member and Bundesbank chief Jens Wiedmann said the deal came close to breaking a ban on the monetary financing of Governments.

Mr Draghi said the ECB "has to make sure that its actions are in conformity with its rules and statutes".

Under Article 123 of the EU Treaty, financing of Governments is banned.

However, the turnabout comes just days after Mr Draghi said that members of the ECB governing council had “taken note” of the deal done between the Government and the Irish Central Bank which had been taken as an acceptance of the swap of the notes for €25bn of Government bonds with maturities of up to 40 years.

The deal also means a deferral of an annual €3.1bn payment.

The transaction “has a fiscal nature, as stated by the Irish government, that’s clear enough,” Mr Weidmann said in an interview.

“I’m very concerned about monetary policy being too closely intertwined with fiscal policy and crossing the line to monetary financing.”

However, bond markets were unfazed by the comment.

Ireland’s five-year note yield climbed three basis points to 2.76pc.

However, Taoiseach Enda Kenny said the Government is “moving on” from the deal.

“Our engagement with the ECB was with the institution of the ECB, not with the individual members and you will recall Mario Draghi’s comments that the arrangement with Ireland was unanimously noted by the ECB,” Mr Kenny said.

“The promissory notes are gone, we’ve made the arrangements. IBRC is liquidated and we’re moving on here with what is a very satisfactory arrangement and a very big signal about the attractiveness of Ireland as a location for investment and of course the fact that there is €20bn less to be borrowed over the next 10 years.”

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