Noonan throws in the towel on Anglo promissory notes-Rabbitte says PN deal in the next few weeks

[PaddyJoe]

Another day, another cave in to the ECB. Remind me again why Kenny and a party of twelve advisers went to Brussels last weekend?
Harry McGee in Friday's IT:

THE GOVERNMENT has quietly downgraded its campaign to persuade the European Central Bank to change the terms of the €30 billion of promissory notes it issued to bail out Anglo Irish Bank, according to an authoritative Government source.

The efforts by Minister for Finance Michael Noonan to seek a reduction from the ECB in the 8.2 per cent interest rates being charged on the notes or extend the term of the loan has not really worked, said the source. In all, Ireland will have paid a total of €16.8 billion in interest when the debt matures in 20 years’ time.

It is understood the lack of headway with the ECB was a motivating factor for Taoiseach Enda Kenny bringing up the issue of Ireland’s €63 billion bank recapitalisation bill at the EU summit last weekend. The Taoiseach asked other EU leaders to allow a more sustainable way for Ireland to pay back the loans it has taken.

The Department of Finance said this week talks were continuing at official level with the ECB. However, the source said politically, the Government was not optimistic about a positive outcome.

When Mr Noonan first broached the issue with Jean-Claude Trichet in September, the Minister for Finance conceded that the then head of the ECB had been “pretty non-committal” on the promissory notes issue.

The source said while the Taoiseach had talked about a total of €63 billion, what was really at issue were the promissory notes for Anglo and Irish Nationwide.

“We will talk with the EU Commission and with the council secretariat about this issue rather than with the ECB,” said the source.

Mr Kenny has consistently said the €63 billion was borrowed before the EU-IMF bailout programme in November 2010. Department of Finance figures this week confirmed he has not been strictly correct in that assertion. An analysis shows only €42 billion of the €63 billion was borrowed as €21 billion came from the National Pensions Reserve Fund

http://www.irishtimes.com/newspaper/...309148420.html

[PaddyJoe]

Noonan says this evening that he has a commitment from the Troika that technical work will be done on a common paper agreed by the EU/IMF/ECB on changes to the promissory notes.
This agreed paper is to be complete by the end of February.
Is this the first sign of some kind of quid pro quo to be offered as a sweetener for a Yes vote in the upcoming referendum on the 'fiscal compact' Treaty?

[C. Flower]

Noonan says this evening that he has a commitment from the Troika that technical work will be done on a common paper agreed by the EU/IMF/ECB on changes to the promissory notes.
This agreed paper is to be complete by the end of February.
Is this the first sign of some kind of quid pro quo to be offered as a sweetener for a Yes vote in the upcoming referendum on the 'fiscal compact' Treaty?

Noonan was emphatic that this was not an Irish initiative and was being done by the Troika. Never would we dirty our hands or reputation by even breathing a word about not paying "our" debts.

Philip Boucher Hayes asked in the Troika press conference today if there was anything in the Memorandum which would force Ireland to pay, and whether there was any divergence between the ECB/EU/IMF on payment. The IMF was clear that they were in favour of "not paying." The others admitted that Ireland could not be forced to pay under the terms of the agreement.

There was an implication, btw, in Boucher Hayes'report on the same press conference that Howlin had "over-emphasised" the extent to which there was agreement by the Troika to use the proceeds of sales of public assets for "job creation" rather than for paying the banks.

Vincent Browne made shapes, but Boucher Hayes' questions were more interesting.

[Holly]

No one believes it is the Troika which is ordering that the promissory notes be honored by an extinct bank.

[DCon]

Germany and Ireland have a lot in common apparently

http://www.irishtimes.com/newspaper/...O61vu0.twitter

[C. Flower]

Interesting piece on this by Namawinelake -

http://namawinelake.wordpress.com/20...missory-notes/

Why did we create promissory notes in the first place? Anglo and INBS became insolvent – that is their assets were worth less than their liabilities – after making big losses on their property loans when the property bubble burst. The Government gave guarantees to Irish banks in September 2008 and was consequently compelled to inject funds into Anglo and INBS to make them solvent again. The Government did use cash at the start and gave Anglo €4bn and INBS €0.1bn but thereafter started writing these promissory notes with the approval of the ECB.

So we have this giant noose around our necks with these promissory notes, can we renege on them? Pass. I don’t know if the promissory notes and the letters of comfort together make for a binding obligation. On one hand, the notes were issued pursuant to a banking guarantee in September 2008 which was approved in our Oireachtas. On the other hand, the specific costs have not been agreed by the Oireachtas as provided for under our Constitution and there is an international concept of “odious debt” which argues that debt not properly incurred by a nation is not sovereign debt.

What can we do to reduce the cost of the promissory notes? Well one thing that won’t reduce the cost is getting agreement from the ECB or anyone else to lower the interest rate on the promissory notes, because as shown above, it is a red herring as we own Anglo and INBS 100%. Present projections are for the annual €3bn is to sourced from the sovereign bond market from 2014. And that bond market is presently charging 7.5% for 10-year money. We are paying just over 3.5% for bailout money, so if a second bailout was arranged at a low cost then that would probably deliver savings. Or the ECB could agree for the promissory notes to be paid over a longer period, 30 years perhaps.

What’s the difference between Anglo promissory notes and Anglo bondholders? Bondholders lent money to Anglo before 2008 for fixed periods of time, five years for example, and these bonds are coming due all the time with a particularly big one next week when €1,250m is repaid. Promissory notes are our IOU debts to Anglo.

...

But the Government continues to assert that it is involved in such negotiations, and those assertions have been repeated as little as four hours ago when Ministers Noonan and Howlin gave a press conference. However when the Troika was asked at its press conference about the “negotiations”, the response from the IMF Mission Chief to Ireland, Craig Beaumont was merely thatIreland had “requested” technical discussions. These seem to be two very different interpretations of what is going on, and I can’t help but remark that the IMF has less reason to obfuscate the truth than our own embattled politicians who next week will face the fury which will accompany the payment of €1,250m to senior unsecured, unguaranteed – that is, not covered by the September 2008 guarantee which has now expired in relation to pre-2008 bonds – bondholders at what was formerly Anglo.

[DCon]

Not the link you intended, DCon?

thanks PJ. Been fixed

[PaddyJoe]

Interesting piece on this by Namawinelake -

http://namawinelake.wordpress.com/20...missory-notes/



...

That's a very good piece by NWL and one of the clearest explanations of the promissory notes that I've seen.
The problem for the ECB is that they are afraid of what Italy or Spain will look for if they cut us too much slack.

[PaddyJoe]

The yawning chasm between Irish government spin on the Anglo promissory notes and the reality is exposed once again:

THE European Central Bank is not considering proposals to delay the State's massive payments on Anglo Irish Bank's €30bn bailout, the Irish Independent has learned.
Sources confirmed the "only" Anglo scenario the ECB was considering involved swapping the bank's €30bn government IOU for another kind of IOU or bond.
The news comes after weekend reports and comments that the Government was seeking to delay paying Anglo's €30bn bailout for up to a decade.
Some commentators suggested it would be in the ECB's gift to grant this, since the bulk of the €30bn is being used to pay down money owed by Anglo to the Central Bank of Ireland and the ECB.

http://www.independent.ie/business/i...s-3003970.html

[culmore]

Very hard to undo an agreement made by other people, thanks Clown and Lenny

[Baron von Biffo]

Very hard to undo an agreement made by other people, thanks Clown and Lenny

Does that excuse have a best before date or will FG still be using it in 50 years time?

[culmore]

Biffo its a fact, but highly FG will be there in 50 yrs or even 10 yrs

[Baron von Biffo]

Biffo its a fact, but highly FG will be there in 50 yrs or even 10 yrs

If the previous government so constrained its successor that nothing can be done to alter the course of our affairs, why was it important to elect FG candidates at the GE?

[PaddyJoe]

Rabbitte claiming this evening a restructuring of the promissory notes will be achieved in the next few weeks before the March 3 Billion payout:

--Communications Minister Pat Rabbitte sees some sort of restructure before the next annual repayment of the IOUs
--Rabbitte says restructuring is "absolutely critical."
--Signs for a bank IOU deal are "propitious."
By Eamon Quinn

Of DOW JONES NEWSWIRES
DUBLIN (Dow Jones)--A deal to lessen the burden Ireland faces in paying down EUR31 billion in promissory notes, or IOUs, the Irish government has pledged for broken banks such as Anglo Irish Bank Corp., will be struck "in the next few weeks", providing a major boost for the country to emerge from its bailout and regain market funding, a senior Irish government minister said Thursday.
In an interview with Dow Jones Newswires, Communications Minister Pat Rabbitte said that some sort of restructure will be agreed with the country's bailout lenders before the next annual repayment of the IOUs falls due next month.

http://www.dowjones.com/products/djf...tesInWeeks.asp

[PaddyJoe]

Rabbitte seems to be rowing back today. Bet he got a kick up the ass from the boss

Minister for Communications Pat Rabbitte said today that there is no timetable for restructuring the repayment terms of the Anglo Irish Bank promissory notes.

Minister Rabbitte said that he hopes the negotiations will be finalised sooner rather than later.

His comments come after reports that the Minister expected an agreement on the restructuring in the next few weeks.

Read more: http://www.breakingnews.ie/ireland/r...#ixzz1lzMmCBSv