Business Irish

Monday 20 November 2017

We won't ask for bond haircut, even if Greece gets one, says Noonan

Laura Noonan and Donal O'Donovan

THE Department of Finance last night insisted Ireland would not push for the European Central Bank (ECB) to take a hit on its massive Irish bond portfolio -- even if the bank agrees to accept a 'haircut' as part of the latest Greek rescue deal.

The comments came amid reports that the ECB had agreed in principle that it would not force Greece to pay the full redemption price of bonds the ECB had bought in the secondary market at a discount.

The ECB is not expected to take a loss on its purchases and may still make a marginal profit since it could have bought some of the debt at substantial discounts, but it would still mark a major departure form the bank's traditional stance of full repayment.

The ECB is believed to own about €20bn of Irish government debt. Market sources say some bonds were bought at a discount of up to 15pc, though the average discount is likely to be significantly lower.

Finance Minister Michael Noonan yesterday afternoon appeared to hint that Ireland would push for a similar deal, telling Today FM: "There's a suggestion that there might be some arrangement [for Greece] made with the ECB and if that happens, we'll be watching it very closely and we'll try to avail of it as well".

But he later clarified that the advantages he saw for Ireland were "a strengthening of our negotiating position" in ongoing efforts to restructure the €30bn bailout of Anglo Irish Bank, and not around the ECB's holding of Irish bonds.

A spokesman for the ECB declined to comment on any implications that a Greek deal could have for the bank's holdings of other countries' debt. The issue is likely to be raised with ECB president Mario Draghi at his monthly press conference today.

"If the ECB are prepared to make this kind of concession to Greece it would encourage me to think that they might be ready to make concessions on the promissory note [used for Anglo's bailout]," Mr Noonan said last night.

IOUs

The Government wants Europe's help to restructure the €30bn of IOUs it gave Anglo so they can be paid off over a longer time period without damaging the bank and making it ineligible for ECB support.

In recent meetings with the European Commission's economic chief Olli Rehn and the ECB's Mr Draghi, Mr Noonan stressed that Irish people were frustrated with the fact that Greece was getting concessions while Ireland was being made pay.

The Finance Minister is understood to have intimated that assistance from Europe with the Anglo issue would rebalance that inequality.

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