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State could save €1bn a year on longer Anglo deal

THE burden of Anglo Irish Bank's bailout could be cut by about €1bn a year if the Government succeeds in getting payments stretched out over 30 years.

The Government could cut annual payments from €3.1bn to about €2bn a year under a proposed new deal with Europe, figures prepared by the Irish Independent showed.

Ireland would still have to pay out the same amount eventually, but would be paying smaller amounts over a longer period of time. This would ease the immediate pressure on the public finances.

Reports yesterday also claimed the Government was pushing to delay a €3.1bn Anglo repayment due at the end of the month until a new deal was reached. If they got that deal, it would lessen the chances of Ireland having to implement a 'mini-budget' to deal with any deterioration in the public finances.

The news came after Taoiseach Enda Kenny spent much of yesterday trying to dampen speculation about the deal to ease the bank debt burden.

Expectations

Reports in the 'Wall Street Journal' cited a senior Irish official as saying technical talks on a new bank bailout had been completed by the European Central Bank (ECB), the European Commission and the International Monetary Fund.

But Mr Kenny told the Dail there was "no deal done".

"I'm not going to heighten anyone's expectations here," he said. "This is a really complex, difficult and sensitive issue."

However, the Irish Independent understands that there is broad agreement between the international officials on elements of a potential deal.

But some details remain unresolved. Crucially, any deal needs approval from European leaders and from the ECB's governing council -- something that could take months.

"There is no timeline on this nor have I put a timeline on it because I cannot speak for governors of central banks of the eurozone or, indeed, for the other elements of the troika," Mr Kenny stressed.

The Government has repeatedly refused to give any indication of how much money could be saved by changing Anglo's bailout terms.

Figures prepared by the Irish Independent suggest that the annual payments could be cut to about €2bn a year if the repayments are spread.

This analysis assumes that Europe gives Anglo the same payments that the bank has already been promised by the Government.

Inflation and other factors are allowed for in the calculations at a rate of 4pc per year.

Ireland then repays the money to Europe over a 30-year period. This includes an interest rate of 3.5pc, similar to what Ireland already pays Europe on the national bailout.

Because the deal is yet to be struck the actual interest rate and inflation may be different.

In the Dail yesterday, Fianna Fail leader Micheal Martin said a number of cabinet ministers were linking the negotiation on the banking debt to the upcoming EU fiscal treaty referendum.

The Taoiseach again claimed the timing of the referendum and the banking debt negotiations were entirely separate.

Irish Independent