Pearse Doherty (Donegal South West, Sinn Fein)

Tairgim:

That Dáil Éireann,

noting that:

— following the transfer of its assets to the National Asset Management Agency (NAMA) in 2010, Anglo Irish Bank was left with toxic debt of €30.6 billion;

— from March to December 2010 the Government issued a series of promissory notes to Anglo Irish Bank and Irish Nationwide Building Society totalling €30.6 billion;

— these promissory notes placed an obligation on the State to pay Anglo Irish Bank €30.6 billion;

— the interest rate charged on these loans by Anglo Irish Bank will cost the State an additional €16.6 billion;

— this debt, totalling €47 billion, amounts to 27% of the State's debt-to-GDP ratio;

— the repayment of this debt will take place over a twenty year period from 2011 to 2031;

— as the State will have to borrow money to service this debt, it is reasonable to assume that an additional cost of at least €28 billion will be incurred by the State in interest payments on monies borrowed to pay the €47 billion to Anglo Irish Bank;

— this additional cost is calculated at an interest rate of 4.7% based on average cost of funds raised by the National Treasury Management Agency (NAMA) in the bond market in 2009 and 2010;

— on this basis, the cost to the State and the taxpayer arising from the promissory notes will be at least €74 billion up to when the final payment is made in 2031;

— a number of economists argue that this is a conservative estimate and the cost of servicing this debt will be much higher, possibly four times greater than all the combined 'austerity' spending cuts and tax increases to date;

— the first transfer of money to Anglo Irish Bank arising from promissory notes took place on 31st March, 2011, totalling €3.1 billion;

— annual transfers of €3.1 billion will be made every year on 31st March from 2011 through to 2023;

— from 2024 the annual transfers will gradually decrease from €2.1 billion in 2024 to €0.1 billion in 2031;

— these annual payments do not include the additional cost of the interest on monies borrowed to service the €47 billion transfer to Anglo Irish Bank;

— alongside these payments Anglo Irish Bank, now operating as Irish Bank Resolution Corporation, will continue to use taxpayers' money to pay unguaranteed, unsecured senior bondholders;

— on 2nd November, 2011, the Government allowed Anglo Irish Bank to pay a single unguaranteed, unsecured senior bond to the value of $1 billion despite enormous public opposition;

— on 25th January, 2012, Anglo Irish Bank will pay out a single unguaranteed, unsecured bond to the value of €1.2 billion;

— on 28th June, 2012, Anglo Irish Bank will pay out a single unguaranteed, unsecured bond to the value of €454 million; and

— twenty four additional unguaranteed, unsecured senior bonds with a combined value of €800 million will be paid out from January 2012 through to April 2018;

agrees that:

— the former Fianna Fáil-Green Party Government were wrong to issue these promissory notes;

— this decision undermined the public finances, increased the deficit and damaged the social and economic stability of the State;

— the current Fine Gael-Labour Government must make clear that it is not in a position to pay this toxic private banking debt;

— the Taoiseach, Enda Kenny T.D., and the Minister for Finance, Michael Noonan T.D., should enter into immediate discussions with the European Central Bank to have the promissory note withdrawn and to remove this toxic private banking liability from the State and the taxpayer;

— the Government should seek support from our European partners in this endeavour on the grounds that removing the obligation created by the promissory note would reduce our debt-to-GDP ratio to approximately 87%, easing the State's transition back to the international bond markets and assisting in reducing the deficit and returning the economy to sustainable social and economic development; and

— the practice of using taxpayers' money to repay the promissory note must end; and

calls on the Government to intervene to prevent Anglo Irish Bank from using taxpayers' money to repay unguaranteed senior bondholders.

Ba mhaith liom mo chuid ama a roinnt le mo chomhghleacaithe.

The Anglo Irish Bank promissory note is a national scandal. It is one of the biggest scandals of the entire banking crisis. It will cost the taxpayer at least €74 billion by 2031 and according to some economists may cost up to €90 billion. That the Fianna Fáil-Green Party Government signed the taxpayer up to this toxic private banking debt will surprise no one but that Fine Gael and the Labour Party continue to support its payment is truly shocking. Next month the Government will bring forward a budget that will wrench €3.8 billion from the domestic economy in spending cuts and tax increases aimed at the same groups of people targeted by the previous Government, namely, low and middle income earners, the working poor, the unemployed and those on social welfare. Despite this, one of the first acts of this Government was to give Anglo Irish Bank €3.1 billion of taxpayer's money on 31 March. This was the first instalment of a 21 year long transfer of taxpayers' money to Anglo Irish Bank.

According to the medium term fiscal statement published by the Government last Friday, it proposes an adjustment of €12.4 billion from the economy between 2012 and 2015. During this same period it will give Anglo Irish Bank exactly the same amount of money. To any ordinary intelligent person this simply does not make sense. Out in the real world people are asking why this money cannot be used to fund investment in jobs, hospital beds for people languishing on trolleys, special needs assistants for children with disabilities, adequate payments for pensioners suffering from fuel poverty or adequate allowances for carers in the home. How is it that a Government which criticised its predecessors for issuing these promissory notes now willingly hands billions and billions of euro of taxpayers' money to Anglo Irish Bank at the same time as increasing taxes on working families, cutting services to those in greatest need and abandoning more than 447,000 people to the dole queue? How did we get to this point?

In 2010, after NAMA bought assets from Anglo Irish Bank at a significant discount, the bank was left with a €30.6 billion hole in its accounts. The bank was completely insolvent and was locked out of the interbank market. The State did not have enough money to fill the hole, having already given Anglo €4 billion in 2009, and as an insolvent bank it was ineligible for ECB emergency liquidity assistance. The Government and the Central Bank came up with a brilliant plan. The Government would give the bank an asset, known as a promissory note, to balance their books. This asset is essentially an IOU committing the Government to fill the black hole in the bank's assets over a 21 year period. Emergency liquidity would continue to be provided via the European and Irish Central Banks and once in receipt of the annual cash transfers from the Government, the bank would use that money to repay the Central Bank its emergency liquidity loans. Back in Frankfurt the European Central Bank, as the ultimate source of the emergency liquidity assistance, was reassured that the money it was lending to the Irish Central Bank and then on to Anglo Irish Bank would eventually be paid.

In short the Irish taxpayer would pay the €30.6 billion of toxic debt run up by Sean Fitzpatrick and his developer friends, while the bankers and developers would walk away scot free. The bill does not stop there, however. The interest that has to be paid on the €30.6 billion amounts to an additional €16.6 billion, which means the actual amount that will be transferred from the taxpayer to Anglo Irish Bank will not be €30.6 billion but a massive €47 billion between 2011 and 2031.

The first instalment of this massive bank bailout was paid by the Fine Gael-Labour Party Government on 31 March 2011, when it handed over €3.1 billion of taxpayers' money to Anglo Irish Bank. The same amount will be paid out again on 31 March 2012 and every year until 2023, after which smaller payments will be made through to March 2031. This is not the end of the story. The Government will have to borrow this money to meet the annual pay-out and it will have to pay annual interest on those borrowings. While it is impossible to state exactly how much this extra interest payment will cost, on the basis of pre-euro crisis Irish interest rates the extra cost until the last payment is made on 31 March 2031 will add €28 billion to the total bill. This would mean the total cost to the taxpayer of the Anglo Irish Bank promissory note will be €74 billion by the time the final payment is made in 2031.

A number of independent economists, including Michael Taft, Tom McDonnell and Michael Burke, estimate that the final bill for the promissory note could be between €80 billion and €90 billion. These sums are staggering. To put them in perspective, €74 billion means that every single man, woman and child in this State will pay €16,157 to cover the promissory note to a toxic bank that no longer holds deposits. This is €24 billion more than the cost of running for State for a full year. It would fund the entire health system for nine and a half years. I do not understand how anyone in government can stand over this. The simple fact is that we cannot afford this bill. The promissory note itself amounted to 20% of our national debt in 2010. The annual transfers to Anglo Irish Bank weigh heavily on our annual deficit. Not only is it morally wrong to ask the taxpayer to shoulder this toxic private banking debt but it is socially and economically irresponsible.

The Government must, as a matter of urgency, declare its inability to pay this private banking debt. It must do so on the basis that to try and pay will cripple the economy and further block any meaningful social and economic recovery. Having done this, it must then engage as a matter of urgency with the European Central Bank and its European Council counterparts to negotiate the lifting of this burden from the taxpayer. My party colleagues and I have been calling on the Minister for Finance to take this course of action for the past several months. In September I raised the matter with the Minister directly, the Governor of the Central Bank and the chairperson of Anglo Irish Bank. I was told the Minister had failed to raise this in any specific way with his European counterparts. I am glad, however, that following persistent questioning from Sinn Féin, he has shifted ground somewhat. At least he now talks about seeking a rescheduling of this debt. If the Minister thinks the rescheduling of interest payments will be sufficient, he should think again. The Government's objective must be to have the promissory notes withdrawn. At the very least, the Minister should seek a lengthy period of non-payment, for example, ten years, at which point discussions on the future of the notes could be reopened. Some will say this is not an achievable objective, that the ECB would withdraw its emergency liquidity assistance from all Irish banks and that the European Union and the IMF would withdraw their programme funding. These arguments are nonsensical, dishonest and, at worst, amount to scaremongering. The withdrawal of temporary liquidity assistance to Irish banks would not only collapse the Irish banking system, it would also bring down the entire European banking system. Does anybody really believe the ECB would pursue this course of action? The withdrawal of EU-IMF programme funding would create market turmoil on an unprecedented scale, bringing with it greater contagion to core eurozone economies and further endangering the euro. Does anybody really believe the European Union and the IMF would pursue this course of action?

It is in the interests of the European Union and the IMF to lift the burden of the Anglo Irish Bank promissory notes from the State. As things stand, with high unemployment and low consumer demand, the prospects for growth in 2012 and 2013 are poor. Interest rates on Government bonds remain at unacceptably high levels. There is simply no way that Ireland will be in a position to return to the international markets in 2013 unless matters improve dramatically. However, the removal of the promissory notes from the national debt, following a successful negotiation with the ECB, would bring our debt-to-GDP ratio down to below 90%, reduce the annual deficit by over €3 billion, reduce the cost of servicing the national debt and free up resources to invest in job creation and economic recovery.

It is far from certain that the Government will be able to return fully to the markets in 2013, as is its stated objective. This raises the prospect of a second bailout. A successful outcome on the issue of the promissory notes would not only ensure access to the markets in 2013, it would also likely see an early return to the markets in the first half of 2012. The IMF, the European Union and the ECB know this. The European Union needs a good news story; it needs one of its programmes to succeed. Ireland's failure to re-enter the markets in 2013 would demonstrate that even the poster boy of the austerity programmes could not be cured by the medicine prescribed by the European Union and the IMF. This would have profound repercussions not only for us but also for the eurozone and the Union. As for the ECB, there is an indication that it is open to a policy change under its new president, Mario Draghi. Last week's interest rate cut and the decision to extend the maturity date of the emergency liquidity assistance from three weeks to one year give some room for optimism that the new regime is more open-minded than it was under Mr. Trichet.

There is no moral or legal obligation on the State to continue to use taxpayers' money to pay off Anglo Irish Bank's toxic banking debts. There is also no credible economic argument for pursuing this course of action. The case for lifting this burden from citizens is irrefutable. The issue is not whether the European Union or the IMF can be convinced of this but whether the Government has the political will to stand up for the interests of Irish citizens and secure a better deal than the one it inherited from Fianna Fáil and the Green Party.

Let us be clear about this. The Government was left with a legacy of terrible policy decisions by the last Government. It has the job of cleaning this up. There are many fights worth having in the Minister's task of cleaning up the mess left by the last Government, but the fight that will have the biggest impact on our debt, the budget and, most importantly, the quality of ordinary people's lives is this one. It is time for the Minister to do the right thing and stand up for Irish citizens. It is time to declare that the State will no longer pay the promissory notes, amounting to at least €74 billion, with taxpayers' money up to 2031.

See this speech in context