Michael Noonan (Limerick City, Fine Gael)

I will deal with the €90 million calculation first and then with the second part of the Deputy's question. The €90 million is estimated to have an incremental impact on the Exchequer which is calculated as follows. The status quo was estimated as the cost of borrowing under the programme for the promissory note instalment, namely, €3.06 billion at 3.5% for the remainder of 2012 giving an interest cost of €80 billion. On 29 March, before the Government bond was issued it was estimated that the bond power value would be €3.53 billion. The coupon was known to be 5.4%. In 2012 the interest cost was therefore €140 million. There is also a technical adjustment under the Government accounting rules which increases the deficit impact to €170 million. The €90 million was therefore the difference between the estimated status quo of €80 million and the estimated deficit impact from the new Irish Government bond of €170 million. The cost to the Exchequer arises from the interest payable on the Government bond not on the margin which Bank of Ireland is getting. Bank of Ireland is a commercial bank of which 15% is in State ownership. Of course it is doing this because it is going to make money on it. Their margin is 135 basis points above the cost of the money. As Deputy Donnelly correctly states, the money is coming at 1%. Of course, that is cheaper than the average cost of funds. The alternative was that we would go back to the European funds, the EFSF fund or whichever fund would provide the funding, where it would cost us on average 3.5%. Because we are getting it cheaper, there is a margin. There is a cost, but if one sets the €90 million off against the fact that we are not borrowing an additional €3.06 billion in 2012, one can see that there is a big advantage because that €3.1 billion remains as money on which we can call if we need it, for example, next year.

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