Tuesday 12 November 2019

Patrick Honohan - Ireland's national debt more sustainable thanks to Anglo deal

David Young

IRELAND'S national debt is a lot more sustainable in the wake of the deal to restructure the state's long term repayment plan, the Governor of the Irish Central Bank has claimed.

Patrick Honohan said the arrangement with European banking chiefs over how to pay off the multibillion-euro debt racked up from the rescue of toxic lenders would not unravel.

 

He also denied reports that Taoiseach Enda Kenny and other ministers had rebuked him over the delays in securing the effective approval of the European Central Bank (ECB) during tense negotiations earlier this week.

 

"It seems to me that the national debt and its path is a lot more sustainable than it was before," said Mr Honohan.

 

"There's always risks, we have published many papers in the Central Bank showing where the risks (are), the scale of the risks. The risks are reduced by this week's development. It is very much within our own grasp to continue the policies that will allow this to be moved into a safer place."

 

The Government's Project Red saw 28 billion euro (£24 billion) worth of costly IOUs - so-called promissory notes issued after the nationalisation of the failed Anglo Irish Bank - swapped for long-term sovereign bonds.

 

These bonds will be issued through the Irish Central Bank.

 

The arrangement, which was backed by ECB officials after a meeting in Frankfurt on Thursday, will effectively see the state repay the debt of Anglo (which had been rebranded as the Irish Bank Resolution Corporation) over a longer period - a move that will reduce the size of annual payments.

 

The Government claims the deal could mean one billion euro (£846 million) in tax hikes and spending cuts can be avoided in upcoming budgets. It has also claimed it will wipe 20 billion euro (£16.9 billion) off the total cost of Anglo.

 

Ministers and Irish Central Bank officials had to move quickly during the week after reports of the potential deal were leaked into the public domain in Europe.

 

This saw an emergency late night session in the Dail on Wednesday and required President Michael D Higgins to fly home from a state visit to sign the legislation, amid fears a delay would foster uncertainty among IBRC's existing bondholders.

 

While the Government hoped to gain immediate ECB approval for the new arrangement between the state and the Irish Central Bank, it did not materialise until Thursday.

 

In an interview with RTE's The Week in Politics, Mr Honohan denied claims that ministers were furious at him and his officials over the delay in sealing the deal with the ECB.

 

But he added: "We were all concerned and tense and anxious to get the thing done quickly."

 

Mr Honohan also addressed the question of why ECB chiefs had used the phrase "taken note" of the arrangement rather than signalling they definitively agreed with it.

 

The governor said it was not for the ECB to agree to it, just to check that the debt restructuring complied with set European frameworks.

 

He said if that had not been the case, the ECB would have raised an objection.

 

Yesterday, tens of thousands of demonstrators took to the streets in six rallies across Ireland to voice their continued anger at the state's debt woes and insist the country's multibillion-euro burden had not been lifted by promissory note deal.

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