Kicking can down the road is good for short-term finances
Q: So what's happened? I'm still getting over all the excitement surrounding the promissory note deal.
A: This is more of the same. The head of the eurozone finance ministers said last night that all 27 European Union finance ministers would discuss a deal today to extend the length of time we have to repay the €40bn we borrowed from Europe under the bailout.
Q: Only €40bn? I thought the last government borrowed much more than that?
A: We did, but some of the money came from our own savings and the rest came from the IMF and countries outside the eurozone such as Britain and Denmark.
Q: So what happens next? Are we getting a debt write-off?
A: If only! What looks likely to happen today is that the finance ministers will agree to some sort of arrangement, which will delay the repayment of the €40bn we owe Europe. That's great news because the first big repayment was due in 2015.
Q: Well that would have put a damper on the 1916 centenary! Does this mean the Government will have enough money to go out and buy a few fireworks?
A: It will undoubtedly reduce the pressure on Michael Noonan or whoever succeeds him. By kicking the can down the road, the Government's finances will be much healthier in the short term.
Q: How much healthier are we talking about?
A: We don't know yet. Everybody is being rather coy about the details. Some loans come due in three years, five-and-a-half years or seven years. The Government wants to push them all out to an average of 15 years but probably won't get something that generous.
Q: But surely this is reason to celebrate?
A: It is, but the deal hasn't been done yet and Europe has a long record of shying when it comes to jumping a fence. The Government wants to see the deal done before it starts bragging. Even then, it might not brag too much. The German government was furious with all the bragging that went on after the promissory note deal. It makes German voters very uneasy and there is an election there this autumn. In fact, there is a remote possibility that the Germans will reject today's deal if their legal advisers say it needs the imprimatur of the German parliament.
Q: Still, hats off to Michael Noonan. He seems to be on a bit of a roll.
A: While he undoubtedly deserves credit, perhaps the most credit goes to Portugal, who first came up with the idea. We have sort of hidden behind their coat tails, which is no bad thing as we can be seen to be Europe's beggars-in-chief.
Q: Is this the last deal that we want from Europe ?
A: No. We are still hoping to convince the Europeans to retrospectively write off some of the cost of bailing out our banks. To do that, we've to get friendly with the Spanish who also suffered a banking bust but that's another day's work. For now, it is best to sit back and celebrate the fact that the State will probably have considerably more wiggle room over the next few years.