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Update at 3.30pm: The Taoiseach has told the Dáil that the promissory note payments are gone, they have been replaced with long-term government bonds.
Kenny told the Dáil: “The first principal payment on these bonds will be made in 25 years time, 2038, with the final payment being made in 2053. The average maturity of these bonds will be over 34 years rather than the 7 – 8 years on a promissory note.” The average interest rate on these bonds will be 3 per cent, compared to 8 per cent on the promissory notes. Read more
Update at 1.25pm: It is now widely reported that the Irish government and the European Central Bank has reached an agreement on replacing the promissory note arrangement.
AT 7.11AM THIS morning the office of President Michael D Higgins confirmed that he had signed the Irish Bank Resolution Corporation Bill 2013 into law following an all-night session of the Dáil and Seanad.
As the government seeks a deal to reduce the burden of the €30.06 billion promissory note payments due in respect of the former Anglo Irish Bank, this legislation gives effect to the liquidating of Irish Bank Resolution Corporation – the entity made up of the former Anglo Irish Bank and Irish Nationwide Building Society.
But why was this done? Why did it have to be done so quickly and what impact does it have on Ireland’s bid to secure a deal on reducing the burden of the promissory note payments?
Let’s break it down…
First off, why was IBRC liquidated?
When the government took over Anglo and Irish Nationwide and rolled them into one to create IBRC it always intended to wind down this entity once it dealt with its substantial loan book, worked out its asset portfolio, and generally dealt with the massive mess left behind that had forced the State guarantee of the banks in the first place.
IBRC intended to achieve “full resolution” by 2020 but now the bank has been liquidated as part of a move by the government to reduce the immediate burden of the promissory note payments. This explainer has more detail but briefly promissory notes are IOUs amounting to €31 billion given to IBRC around 2010 to allow it to borrow funds from the Central Bank of Ireland.
Ireland committed to paying these IOUs back over more than a decade with €3.06 billion due every March for the next ten years but because the European Central Bank and its governing treaty forbids monetary financing – the printing of money – this money would have to be destroyed. This was anathema to, well, everyone really and the government has been seeking a deal that involves not making these payments but at the same time not defaulting on the IOUs.
Labour Party chairman Colm Keaveney leaving the Dáil early this morning. Pic: Laura Hutton/Photocall Ireland
What does the liquidation process entail?
Liquidation is a formal means by which a company is wound up and the proceeds from the sell off of its assets are distributed among creditors, these are people who are owed money.
In the case of IBRC, a special liquidator from KPMG has been appointed by the Minister for Finance to the IBRC and all of its assets including its loan book of about €16 billion will be transferred to the Nastional Management Agency (NAMA) – the State’s bad bank set up after the financial crisis – which will manage the loans until around 2020.
It is also intended that NAMA will issue bonds which have the advantage of being covered by the government guarantee and the cost of these bonds is lower with NAMA paying just 0.75 per cent interest on these bonds. The intention, subject to ECB approval, is that the promissory note arrangement will be replaced with NAMA bonds and will thus remove the annual repayments due in respect of the promissory notes and lengthen repayment schedule over a longer period.
But it also means that the State has taken on the liabilities of the IBRC and they are now official sovereign debt. This means the debt is owed by the State to the Central Bank and therefore the ECB and cannot be written down.
Why did all this have to happen in the middle of the night?
Yesterday evening at around 4.30pm Reuters and Bloomberg news agencies reported that there was a plan to liquidate IBRC under a wide proposal to get a deal on the promissory notes. This, as one source put it, led to “total chaos” in government buildings, the Department of Finance and Leinster House as once it was revealed that there were moves to liquidate the bank it had to be done.
Communications Minister Pat Rabbitte leaving Leinster House. Pic: Laura Hutton/Photocall Ireland
As Minister for Finance Michael Noonan explained last night “there was an immediate risk to the bank” with fears that its creditors would go to the High Court seeking injunctions perhaps more important the markets reacting negatively to news that a State-owned bank was being liquidated. As Noonan later explained you generally don’t say you are going to liquidate a company and wait a few weeks to liquidate it. In an ideal world the government would have announced the liquidation and an ECB deal together but the leaks prevented this from happening.
The government claims that a plan – a secret plan – to liquidate IBRC has been in planning for months which was why legislation was produced so quickly yesterday. Yet still TDs only got sight of it minutes before a debate on it was due to begin at 10.30pm (The Taoiseach eventually allowed the debate to be suspended until 12am). There was much unhappiness about all of this among opposition TDs and senators.
What does the legislation say and what does it mean?
The legislation is 58 pages long with 25 sections. Some of its key points include:
So with that, some 800-850 employees at IBRC are technically out of the job this morning but many of them are expected to transfer to NAMA. The future of high-profile figures like chief executive Mike Aynsley is unclear.
I heard talk that this bill could be unconstitutional?
Generally there are a lot of questions being raised about the amount of power the bill is handing to Michael Noonan though his junior Brian Hayes said this morning that the government, on the advice of the Attorney General, is confident that the legislation is constitutional.
The section about the “common good” and “temporary interference” with property rights of person could fall foul of the constitution but this is in the preamble and not the legislation itself so will need some legal minds to determine that.
Furthermore, Independent TD Stephen Donnelly told Vincent Browne on TV3 last night that he feared portions of the bill were not constitutional. Only in the days and weeks ahead will it be established whether the legislation is legally sound or not.
Stephen Donnelly speaking to Vincent Browne outside Leinster House last night. Pic: Laura Hutton/Photocall Ireland
So now the legislation is passed do we have a deal with the ECB?
No, the government’s hope is that the promissory note arrangement can be swapped for the bonds issued through NAMA. This would have the effect of spreading repayment (we would still be repaying the €30.06 billion) over a longer period and proving less burdensome, removing the onerous loss of €3.06 billion ever year to the thin air (As we explained before, the promissory note money is handed to the Central Bank and electronically deleted).
But all of this needs the approval of the governing council of the ECB (made up of eurozone members’ central bank governors) which is meeting today in Frankfurt and Bloomberg is reporting that some members want to discuss the proposal with their own central banks first and this could prolong the time it takes for a decision to be made.
So this is not rubber-stamped?
No. Furthermore there isn’t exactly encouraging noises coming from economists like Karl Whelan, economics professor at UCD, who told RTÉ’s Morning Ireland that what has happened now is that the money owed to the IBRC, which was owed to the Central Bank, has now been “written-off unilaterally by the Dáil”.
He said the position created now is that NAMA is in debt the ECB. He hypothesised that there could be a decision by the ECB to say that its not happy with the proposal and it is illegal as it amounts to monetary financing (which is printing money) and is illegal under EU treaties.
How confident is Michael Noonan? Well he said he simply doesn’t know if the ECB will agree to it: “I don’t know whether they’ll sign off on it,” he told the Seanad last night. His junior minister Brian Hayes told Morning Ireland he was “confident and optimistic”of a deal.
But at the moment, there is no deal.
But if the ECB does agree, is it a good deal?
That’s really a matter of opinion. If you are of the mind that the promissory notes were an abomination and should under no circumstances be repaid or that at the very least less money should be repaid than €30.06 billion is not a good deal because we’re still repaying all the money.
Protesters outside Leinster House last night. Pic: Laura Hutton/Photocall Ireland
It also has the effect of turning the promissory notes into full-blown sovereign debt, money owed to the ECB which can never be written down. Effectively the deal rules out any prospect that might cut the €30.06 billion principal by a few billion euro.
The only benefit to all this is that it means repaying it over a longer period and the hope is that inflation and the economic recovery will contribute to lessening the overall impact. Paying out €3.1 billion now is economically harsher than it would be in 10 or 15 years time. Though of course it’s still a lot of money.
Michael Noonan says that an agreement to the proposal from the ECB would mean a “very good deal for the Irish taxpayer” but then he would say that. Economist Karl Whelan says that “extending it [the repayments] off into the future is something that can be of benefit” pointing out that Britain is still repaying World War I debts but this goes unnoticed in the grand scheme of things.
What effect does it have on the wider economy, the debt, the deficit, future budgets?
It is impossible to say for definite what impact this deal will have on any of that. But the financial blogger Namawinelake has crunched a few numbers saying that if we replace the promissory note with a 10-year bond that has a 4 per cent interest rate we will pay interest of €400 million compared with the €1.8 billion interest this year due on the interest (which is about €10 billion) applied to the €31 billion promissory note.
He writes: “We will make similar savings in 2014 and 2015, though the savings reduce after that. This consequently means we can potentially cut the adjustment this year by €1.4bn and the Budget in December would be €1.7bn of adjustments rather than €3.1bn.”
What about IBRC’s case against the Quinn family?
As you will know from this explainer the bank is chasing Seán Quinn and his family for some €2.3 billion it claims it is owed as a result of loans to the bankrupt businessman and his family during the boom. This involves a series of complex court actions in various jurisdictions including here in Ireland and eastern Europe.
Under the new law, the cases will transfer to NAMA which will continue to pursue the Quinns through the courts. However the Quinn family, which disputes the amount it owes, could potentially raise issues with this before the courts and delay actions further. Some aspects of the case against the Quinns in Ireland are already delayed by the trial of former Anglo executives.
Labour TDs depart the Dáil after a late-night vote. Pic: Laura Hutton/Photocall Ireland
Oh yeah, what about the cases against Seán FitzPatrick and other Anglo executives?
These are being taken by the Director of Public Prosecutions through the criminal court so are unaffected.
What about the case brought by David Hall?
As we detail here, that case goes ahead with Hall in the Supreme Court this morning contesting the legality of the promissory notes arrangement as there was no Dáil vote when the notes were issued. This case has just been adjourned until next week when the chief justice will consider it. It’s reported that a number of TDs including Luke Ming Flanagan are trying to attach themselves to the case
Will the Dáil get to vote on any agreement with the ECB?
Yes, according to Brian Hayes who said that any deal with the ECB will be put to the Oireachtas.
So what happens now?
We wait for the decision of the ECB governing council and the feeling is that that decision will be a ‘wait-and-see’ one whereby it agrees to examine the proposal and then spends a few days or weeks, probably weeks, going over it.
The upshot is that we are unlikely to get anything definitive today on this. So after a night of fast-paced drama in Leinster House, we are now facing a wait to discover just what this truly means for you and I, the Irish taxpayers.
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Enda is not too fond of the vatican or the church at the moment is he ?
And rightly so…
Amen to that
The deCatholicism of dear old Erin’s Isle. Oh! how the tide is turning.
Good!
And guess what ? The sky hasn’t fallen down. Life is moving on. Money saved.
The Moving Statues have stopped dead in their tracks what a catastrophe.
The moving statues haven’t stopped, they’re just “Out Of Order”, for now anyway…
Statues are on a three day week…
One word. Yey!
About time.. What has the vatican ever done for Ireland!!
you mean apart from sanitation they built aquaducts… or is the wrong type of Romans…. :)
The same crowd John. They only have 100 acres left and foreign dependencies are revolting!
well, for one, they were the first state to recognise ireland as a state in 1920′s and send a nuncio. that was a catalyst to US and others opening diplomatic ties… Brush up on your Irish history there Simon
That is not a very intelligent question
Me thinks that Simon and myself have achieved the higher levels of humor.. Monty Pythons Life of Brian.. Just because religious party’s lobbied for it to be banned doesn’t mean it’s evil… Great Film.
Reg: But apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, the fresh-water system, and public health, what have the Romans ever done for us?
The Education system…brain washed generations of kids to live in fear and superstition.
I think the office should be re opened, but only when the lovely people at the Vatican sell off all their wealth to bulid houses for the World’s Poor. Just like that Jesus chap would have done.
Jesus would tear it down. Brick by brick.
They could send father Ted and dougal over there,they would be great ambasadors for the muppets in the clergy we already have
It is the right move. Now time to get the clergy out of the schools.
About time.
Closure enacted by a Labour/Atheist Minister for Foreign Affairs.
Watch Alive! and other Christian fundamentalists have a field day with this one!
Leave them scream and shout, the next step should be to rid ourselves of those ridiculous blasphemy laws. I think there will be rosary beads rattling all over the place.
Surely there’s a few more we can close – greece? Won’t be getting much return on that one for a while. Embassies should be linked to economic o/p
Embassy’s do a lot more than garner trade. In most eu countries, especially Greece, there’s a huge amount of consular work
That may be so Tag, but I’d guess it “yields no economic return” just like the vatican and Iran.
why not accredit the ambassador in Italy instead of a senior civil servant in Dublin? If Ratzinger refuses to accept it then screw him. Irish in Rome can still go to the nearby embassy.
look up the 1929 latern treaty… the one ambasador is precluded from servicing both missions
Finally. who needs an embassy for a cult!!!
I never knew the purpose of an embassy was to provide an economic return. But now that it is – where can I see the figures on the economic return of our other embassies? And what’s the metric – when we compare the US and British embassies’ economic return, do we adjust for population? Where can we see the figures?
There are different metrics for gauging the work of different embassies: multilateral embassies at the UN in NY or Geneva and the EU in Brussels are to ensure Ireland’s full engagement with the policies of those organisations; embassies in places with a large Irish population provide huge amounts of consular assistance; embassies carry out development work etc etc. Trade is only one aspect. Iran would have been a trade focused mission but as trade volumes have been weak it was dropped. As for the Vatican, although zero economic return is given as the reason everyone knows this is just a gloss over the fact that the Vatican treated Ireland like shit and Ireland is giving a little payback
I don’t believe Foreign Minister Eamonn Gilmore when he claims that the criminal acts of the Vatican in regard to the covering up of child sexual abuse by its clergy and its general dishonesty were not factors that influenced the decision. I’m glat with the decision and also certain that most Irish people agree with it. Hopefully, the cabinet is beginning to show that they have balls – even if they are only ping-pong variety.
Wouldn’t it be nice if those of you who think this is a good idea didn’t feel obliged to rant against the Catholic church and insult the Catholics who read this and take part in the debates. And to say that most people agree is presumption on the part of those who say that.
Yes and No, in that order Sheelagh
Next step is to secularize the education system and remove silly superstitions from state funded schools. Teach not preach.
Perverts in pointed hats do not deserve diplomatic immunity. Hopefully more democratic countries will follow this example.
I’m not a Roman Catholic, and don’t agree with the majority of its teachings, but, I get a bad feeling about this, once its gone its gone, and I believe it is a fantastic source of contacts. Also its grave should not be danced on it served a purpose… oh I don’t know….
I’m dancing on the stupid backward, child abusing cretins. Good riddance
Ahh John…give it a few years and it’ll all blow over! The centuary old love in between the Irish State and the Holy Sea will return..
Whatever about the Vatican and East Timor closing the embassy in Iran seems daft. Iran holds the second largest gas reserves in the world and also huge oil fields too There are lots of Irish engineering companies who supply equipment, parts and expertise to the drilling industry and who would kill for a slice of the action.
If anything this will cost potential jobs and contracts Also aren’t we already exporting tons of Irish beef to Iran? And now no embassy to represent us there?
Have the Irish diplomats in Tehran got some forewarning about Americas future plans for all that lovely oil and gas ?
…..but opens another one in Brussels? – one gaping hole closes, another one opens. In order to get pummelled, one must first assume the position.
The Irish Government apparently owns the villa that houses the embassy…can’t wait to see that up for sale on Daft.ie…
It would make an excellent Hotel or casino.
Paying off Altar Boys isin’t cheap!!
Good to see this country is finally taking small steps at growing up. I just heard Fianna Fail were complaining about it on the news. Off to Mass with you Bertie, Brian and company.
That is real easy to understand, the Brown Envelope Party a.k.a. Fianna Fail, birds of a feather and all that.
Cyril, wouldn’t it be nice if people grew up and accepted that there are other people who are equally entitled to a view point as they have. My problem with all of this is that those in favour of this decision have given no reason that it is a correct thing to do other than they dislike or even hate Catholicism and that is racism at it’s worst. Since Eamonn Gilmore took office he has concentrated on ‘reform’. That to Eamonn means getting rid of catholic schools and attacking the church at every opportunity. There are Catholics in this country and they are not all lacking in intelligence. Those opposed to Catholicism, God and religion don’t have a monopoly on intelligence. They sometimes express an arrogance that is frightening to say the least. Jumping on the child abuse issue to put everything about the catholic church down is unfair not just to Catholics in general but also using this issue to insult and further degrade others is totally wrong. A bit of honesty is required and we harangued those running for president, perhaps we should do likewise with Eamonn Gilmore and find out what is his real agenda.
Whilst I agree with cutting diplomatic expenses in principle I think it’s rather vindictive to close the embbasy in the Vatican. There are STILL a large number of practising Catholics in this Country. They could easily cut half of the 75 embassies dotted around the Globe. How about closing the diplomatic offices in Belfast and Armagh?
Surely the All Ireland council could deal with any issues arsing between the two parts of Ireland.It’s just noses-in -the-trough and waste waste waste on this little windswept rock of ours!
You can still practice Catholicism without an embassy in the Vatican. In fact I’d say most people don’t even realise we have one in the Vatican. It’s a cost cutting measure, not a worsening of diplomatic relations.
The “Diplomatic relationship” with the Vatican is of no importance to this country. If people wish to practice their religion then it is their right to do so but why should the tax payer be burdened by this.
You don’t need an embassy to practise a religion, we’d hardly have an embassy in Mecca for all the practising Muslims in Ireland. Fact is it’s not worth maintaining an embassy in a tiny quasi-state just because it happens to be the headquarters of a worldwide cult.
Last time I remembered Vatican City was a State and the Republic of Ireland is a State. On a State level what has this got to do between Irish Catholics and the Pope. My tax should not go to your religion. Even if it was a majority in Ireland. We are a Republic not a theocracy. That means religious neutrality although or daft constitution is anything but, which is why Dana waved it around like confetti.
If you need assistance while Vatican you can always go to the embassy in Rome- about four kilometres away. What’s the big deal?
Good to see the sweet stench of sectarianism at its best with some of the comments here. Makes me so proud to be a 21st century Irishman. In particular the “Fuck ‘em” comments. Deliciously bilious. Take a bow Daniel Doran and Paul Lanigan.
Burned Toast to say we are sectarian is to imply we approve of one religious sect over another. I cant speak for anyone else but for me when it comes to religion I am an equal opportunities ridiculer. The only time I distinguish between any religion is to make concrete observations on the degree of stupidity or violently stupidity or repressive stupidity. Religion is not ethnicity or sexual orientation. It is a lifestyle choice and a determined organised attempt to influence people. The ones who are being arrogant and out of order are those religious who believe that it is out of order to challenge these silly tales. We challenge Fianna Fail and no one accuses them of being an anti Fianna Fail bigot. Religion is dumb and we are not bigots to celebrate its demise.
Cyrril. You sound just like a person who says we don’t care what the colour of their skin is; if it’s not white, it’s not white. You should probably be aware that action against a person or persons on religious grounds is as serious an offence under law as discrimination on grounds of sexuality, gender, race, ethnicity or marital status, yet I am sure you would not treat the homosexual section of society or their representative groups in such a manner and with impunity. To state that religion is a lifestyle choice shows a juvenile understanding and childish disrespect for views and beliefs which people are entitled to hold. Don’t take my word for it, try Bunreacht na hEireann on for size and see that religious freedom is constitutionally enshrined, unless you disagree with that too in which case might I suggest a one-way trip out of Dublin airport for you. I’d even consider paying your upgrade.
burned toast, many are born homosexual, none are born catholic
Burned toast you are an ignorant fool. How dare you suggest that I might be racist because I dont respect points of view that dont respect evidence. How dare you suggest that I would harm or discriminate against anyone. You are the type of person that proves religion turns some people into malevolent sheep. I have never denied religious freedom to anyone. You are free to believe whatever you wish that also goes for David Ike who believes world leaders are reptiles in disguise. Just dont tell me I need to respect them.
QED. (And if you don’t understand why, spend the day reflecting and seeing if you can figure it out. It could well be the most enlightening thing you do).
Breaking news the former Irish Embassy in the Vatican has moved to Clearwater in Florida. The leader of the Church of Scientology stated he hoped it ushered in a new era of understanding between the Church and Ireland. In addition he formally requested tax exempt status and control over the Irish education and health system.
If the sole purpose of Ireland having its own Embassy in another Country, is for Economic Growth between both countries, then there are 27 Irish Embassies or Consulates Abroad that we do not require, that I know of.
As a regular church going young catholic i agree that the embassy should be closed. I consider myself a devout catholic but never saw the need for the embassy not sure about closing the Iranian one though. A big population there and an area where there will no doubt be a major war with the west in the future. We could use our neutral stance to negotiate with the Iranians in any future conflict.
Waffled, that statement is NOT a fact, the jury is still out on that.
Sheelagh Im hetrosexual do I have a choice to wish to chase men instead women when Im in the pub? If I did it would mean I was bisexual which would not be a choice either. You have been spending too long in the Michelle Bachman facts versus opinions class.
Sheelagh who told you that David Quinn?
Charming.
The bigger story should be the closing of the embassy in Iran. Surely a sign of impending conflict there which will not be good.
The Yanks blockaded the supply of Ferrero Rocher.
Yipee :))
Don’t agree with closing embassy in Iran or East Timor. How much does the office in Palestine cost when you have an embassy right there in Israel? Then Iran country of 75 million “The government cited trade volumes” yea sure Iran falls way behind Lesotho and Malawi with trade volume. How many offices Ireland has in the US? 5 or 6?
Again it’s not all about trade, African missions carry out important development work and the office in Palestine too
Irish Aid does not need an embassy/representative office to carry out development work. They even said that in the press release regarding the East Timor office closing. If East Timor can get by with an embassy located over ocean 2500km away then Palestine can get buy with an embassy located by road 70km away. Same as any of those tiny African countries.
The reason the Iranian office is being closed is because the Americans and British are planning to bomb the place to fine sand as soon as their troops are pulled from Iraq.
was there not a report in the last year maybe 18 months ago about how much it cost to redevelop the office and accommodation for the suite in Rome.
@burnt toast the catholic church can’t talk about discrimination by others when it is the biggest culprit of discrimination, women are treated like 2nd class citizens and if a teacher in catholic school was found to be gay/lesbian he/she could be sacked on the grounds of their sexuality, so don’t start with us with catholic being discriminated when they themselves practice it everyday!!!
That is not true.
Then go ahead and provide your rebuttal Sheelagh. You’re not ratzinger, you don’t have papal infallibility!
Burnt toast get off your soap box!!
Sorry, that should read Waffler.
€455,820 for an embassy in a region of 800 people? Am I the only one who thinks that is rediculous?
Embassy should have been shut down during the time of the child abuse scandal!
Good riddance, the less Ireland has to do with theocratic pariah states like the Vatican and Iran the better! There’s no real difference between ayatollahs and popes they are both dictators and are both pushing a medieval and bizarre cult upon the free thinking people of the world. The sooner they are both consigned to history the better for human kind!
@hanly sheelagh it is true the church has a special exemption from the discrimination laws as it would affect their ethos, they are one of the biggest culprits for discrimination in this country, so they have no right to call discrimination on people who believe that the Vatican embassy should be closed its a waste of money we don’t need one when the Italian embassy is located less than 4km down the road if we have a Vatican embassy we should have also have an embassy to the church of England
Russia also said yesterday that if their was a attack on Iran they would not stay idle .WW3 beckons.
@Sheelagh Hanly….. If your catholic church is so holy why dos’nt it give it’s wealth to feed the poor and live off this holy faith of their,s
@Sheelagh Hanly….Are you referring to the catholics who support the largest peodephile ring in the world. When they all put money in the box on Sunday they are also financing the largest peodephile ring in the world
Short on vocabulary syndrome!
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