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ECB financing concerns

THE deal allowing Ireland to replace the so-called Anglo Irish Bank promissory notes with easier to manage long-term debt raised concerns at the European Central bank (ECB) about so called "monetary financing".

The ECB is barred from "monetary funding" – which simply means lending directly to governments – but under the deal to tear up the former Anglo Irish Bank's debt to the Central Bank in Ireland the State stepped in, replacing the old note with €25bn of new Government bonds.

In its annual report, the ECB said rules prohibiting monetary financing "were in general respected" across the euro region, "the liquidation of the Irish Bank Resolution Corp (IBRC) raises serious monetary transactions".