Dublin heralded its plan to restructure a chunk of its bank debts as a "historic step" towards exiting its international bailout programme, following two days of high wire talks with the ECB.
Enda Kenny, Ireland’s prime minister, said the deal with the ECB meant his government had met its pledge to cut the €64 billion cost of bailing out its bust banks during the country’s financial crisis. “It secures the future financial position of the state by reducing the burden on Irish taxpayers arising from the bailout of Anglo Irish Bank and Irish Nationwide.”
Mr Kenny failed to win the explicit backing of the ECB for the plan. In Frankfurt, Mario Draghi, its president, would say only the central bank had unanimously decided to “take note” of the move. Under the deal, Dublin plans to issue long-term government bonds with maturities of up to 40 years to replace €28 billion in promissory notes – in effect government IOUs – which it issued at the height of its financial crisis in 2010.
These notes have been used as collateral by Dublin to draw down “emergency liquidity” from the Irish central bank, with ECB approval, to fund the wind up of Anglo Irish and another failed lender, Irish Nationwide Building Society. Under the plan, Irish taxpayers will still have to pay back the €28 billion, but repayments will be stretched out over a longer period, thereby easing the government’s short- to medium-term financing needs. Dublin hopes that pushing out the debt repayments over a longer period will help the country exit its international bailout this year.
Mr Kenny told parliament the value of spending cuts and tax rises required to meet Ireland’s target of reducing its deficit to 3 per cent of gross domestic product by 2015 would be €1 billion less than previously planned. Micheal Noonan, finance minister, later said Dublin would need to talk to the troika of international lenders before determining how to use the savings.
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