Professor Alan Ahearne:

So the difficulty with it was ... I mean, people ... when the promissory note was restructured, a lot of people said, "The expensive, high-interest promissory note is being restructured." Well, that's a misunderstanding. The interest rate of the promissory note was irrelevant. The interest rate was being paid to Anglo. It's just one arm of the State to the other. The promissory note was an extremely cheap way of financing it. The problem with it, it was going away, it was going to be replaced every year by €3 billion of money borrowed in the market. So it wasn't that this was an expensive ... it was a really cheap arrangement but in seven or eight years' time it was gone. So, the trick was how could you keep that cheap arrangement in place for as long as possible and that's what the promissory note deal did. The Irish Central Bank currently owns these bonds. The interest paid goes to the Irish Central Bank. Look at the profits the Irish Central Bank is turning over to the Irish State. That's all internal. So this was a very cheap way of financing it.

€30 billion is a huge number but if I told you that you were going to finance €30 billion over 100 years at a zero interest rate, then it's irrelevant, it's for free. So the point is, when you're talking about national debt like that, you have to look at ... it's not just the amount, it's the maturity and the interest cost. And so the key to the way Anglo was being done was to get the cheapest possible finance and you can't get any cheaper than the ECB. It created issues because the ECB then, particularly as the amount increased in the autumn of 2010, were worried that this was monetary financing, essentially that the Irish Government was borrowing at a very cheap interest rate but it was happening through the banking system.