Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

At the outset I thank the Ceann Comhairle for selecting this important matter. I also thank the Minister for Finance for coming into the Chamber to reply.

It is fair to say the Minister caught us all unawares last night with his statement in the House, giving us a progress report on the Government's efforts to renegotiate the planned repayment of €3.1 billion at the end of this month in respect of the IBRC promissory note. I hope he takes the opportunity today to clarify the status of that matter right now. I am aware that it was considered by the governing council of the ECB at its meeting this morning. No statement was issued at the conclusion of that meeting and I understand that technical talks are to resume again. Perhaps the Minister might update the House on where the matter stands today, following that particular governing council meeting. Can the Minister say whether he is confident at this stage that a deal can be concluded in advance of the repayment date at the end of the month?

The outline of the deal that he described last night is certainly promising. It is a sign of a breakthrough and it is the first indication of some level of flexibility on the part of the European Central Bank on restructuring this promissory note. Its real value is if it is an interim step towards an overall settlement which will ultimately result in a reduction of the debt burden facing the Irish people in respect of legacy bank debt.

Can the Minister clarify some details of what he outlined to the House last night? How would the process work if such a deal is finalised? What he suggested appeared to relate solely to the repayment due at the end of March 2012. Can he confirm if that proposal represents a template for the overall deal he is hoping to achieve? In other words, will the repayment due at the end of March 2013 fall due for repayment under a Government bond in 2026, the 2014 payment in 2027 and so on? Or is the deal that he outlined last night merely an interim measure, pending the overall deal that he is trying to negotiate? Can he take us through the mechanics of how that would work? The bond he is issuing to IBRC under this proposal will presumably attract an interest rate. Will that be comparable to the interest rate currently being quoted on the secondary markets, or will it be an interest rate on a par with what Ireland is currently being charged as a programme country? I assume the cash outflows under such an arrangement would be that the full €47 billion would still be paid, but also that there would be an interest payment in respect of the Government bonds he is proposing to issue.

Most people watching will be interested to know the impact this deal, if successful, will have on future budgets, on the general Government deficit and on general Government debt levels for Ireland. The interest payments which were due from next year onwards were to be factored into the general Government deficit. If this deal is secured, how much easier does it make the achievement of the fiscal targets in 2013 and beyond? I would be grateful if the Minister could address those points.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

During the course of 2009 and 2010, it was determined that Anglo Irish Bank Corporation Limited and Irish Nationwide Building Society, now together known as Irish Bank Resolution Corporation, required significant additional capital. Of this capital, a total of €4.1 billion was provided in the form of equity, or special investment shares for INBS, and a total of €30.6 billion in the form of capital contributions. The consideration provided by the State for the equity was cash and for the capital contribution was promissory notes.

The promissory notes are effectively an IOU to Anglo Irish Bank and INBS. As there was a debt from the State to the institutions, there was an associated interest charge. This interest rate was set by reference to Government yields at the date that each tranche of the promissory notes were issued. The interest rate had to be referenced from Government yields to ensure the promissory notes were booked at full value as an asset on the IBRC balance sheet, without the need for additional capital.

When the final capital contribution was provided on 31 December 2010, an interest holiday was inserted into each of the promissory notes which meant that between 1 January 2011 and 31 December 2012, no interest was payable. Absent the interest holiday, the weighted average interest rate on these promissory notes would have been 5.8%. However, as a result of the insertion of the interest holiday, the weighted average interest rate from 1 January 2013 is around 8%.

The Government has been committed to reviewing the arrangements that were put in place to capitalise IBRC. The purpose of this review is to determine if there was a way to reduce the overall cost to the State. The troika has been engaged in a process with Irish officials to produce a common paper which will consider all options for re-engineering the notes in terms of the source of funding, the duration of the notes, the interest rate payable and so on.

In tandem with this review, the troika has opened a discussion on how best the Irish banking system and the State can benefit from having further improvements made to certain elements of the banking sector. The overall purpose would be to enhance the position of banks in which the State has a major investment. A number of approaches are under consideration, but it must be emphasised that nothing is agreed at this point.

As already indicated, I have met with Commissioner Rehn and with Mr. Mario Draghi, President of the European Central bank, in this regard. The matter has also been discussed at every opportunity and at various levels in the European arena. As soon as the technical discussions are concluded and the joint paper is available, a more formal and structured approach will be adopted to ensure political support.

The discussions with the European authorities on the general issue continue but we are now negotiating with the EU authorities on the basis that the €3.06 billion instalment due from the Minister to IBRC on 31 March 2012 could be settled by the delivery of a long-term Irish Government bond of equivalent fair value. This settlement process does not involve the variation of any of the terms of the existing promissory notes. The key benefit of these proposals would be to reduce by €3.06 billion the 2012 cash outflow from the State through settling with the delivery of a long-term Government bond.

While this development in relation to the March payment would be positive, we must keep our eye on the greater benefits that would derive from the re-engineering of the promissory note and the potential improvements for the continuing banking sector which could also stem from the ongoing technical discussions. It is for these reasons that we must look at the recent developments as an initial step to facilitate a project where, if we are successful, it would be in the medium term rather than immediately.

The Government always committed to informing the Dáil about any development concerning the payment of the promissory note at the end of this month. I brought the Dáil as up to date as possible last night and I cannot add anything further at this time.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

I thank the Minister for his reply and I understand he feels somewhat constrained in putting further information into the public domain but there are certain things he can confirm. Can he confirm that the deal, which he outlined last night, is in effect a stepping stone towards an overall deal rather than a deal on a stand-alone basis, in other words, that he is trying to park the 2012 payment, pending a conclusion of the overall discussions on the redesign of the promissory note? He could at least confirm that much.

Following the governing council meeting today - I expect the Minister had hoped it would have signed off on this deal but it did not - is he still confident a deal can be finalised before the end of the month to avoid the repayment of the €3.06 billion during that timeframe? Can the Minister give us any sense of the shape of the overall deal he is trying to negotiate? Is it the case that he is seeking to re-finance the promissory note liability through the issuance of long-term Government bonds, which will yield some short-term cashflow benefits but will not reduce the overall level of debt burden, or has he put the question of reducing the outstanding level of debt on the table with the ECB and, if so, what has been the outcome?

The Minister can take this opportunity to update the House and inform the Irish people as to whether he is confident at this point that the payment due at the end of March of €3.06 billion can be avoided? Clearly, progress has been made and I welcome that. I hope the Minister can get it over the line because it would give us some essential breathing space to conclude a more comprehensive deal to reduce the burden of bank debt this country is currently carrying. I wish him well in that regard but he can take this opportunity to give us further details.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

I thank the Deputy for his good wishes. I am quite constrained in what I can say but I would like to keep the House informed. At the conclusion of these talks I will come back to the House and give the Deputy all the details to which he is entitled as a finance spokesperson of an Opposition party.

I can confirm that the principal agenda item is to negotiate an overall settlement to have an alternative to the promissory note, which would be less onerous on the Irish taxpayer, and that work is proceeding. What commenced as an Irish request is now being converted into a euro-IMF position paper but of course the decision will be political. As I said in my script, when we get the common agreed paper, we will have to move on and get political support behind it and we will have a more structured approach, through diplomatic channels, to getting that political support.

While what is happening at the end of the month is important, it is not the main game. The terms of it will not necessarily influence the design of what we are aiming for. In other words, it is not a template, as the Deputy remarked. Beyond that, I cannot help the Deputy.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

Is the Minister hopeful of a deal before the end of the month?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

I am as hopeful as I was last night. I am constrained because negotiations have been proceeding both here and in Frankfurt today but as well as that I have spent four hours in the Seanad dealing with the Finance Bill and I have only now got to this House to deal with this issue. I am sure I would have got a note advising me if anything adverse had occurred. My understanding is that matters are proceeding.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

The Minister was not disappointed with today's meeting; he was not expecting an outcome from it.

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

No. I was not expecting a statement, which is different. I cannot really go beyond that but as soon as I am not constrained I will give the Deputy the full information either in a private briefing or here in the House.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context

I thank the Minister for that.

Seán Barrett (Dún Laoghaire, Ceann Comhairle)
Link to this: Individually | In context

The fourth Topical Issue is in the name of Deputy Ellis regarding the effect of cuts in capital funding to the Travelling community, particularly for families in Avila Park, Finglas, Dublin. As the Minister, Deputy Hogan, is delayed in the Seanad, I will arrange for the Deputy's issue to be taken first during the Topical Issues Debate next Tuesday. Is that agreeable to the Deputy?

Dessie Ellis (Dublin North West, Sinn Fein)
Link to this: Individually | In context

Yes. I thank the Ceann Comhairle for that.

Seán Barrett (Dún Laoghaire, Ceann Comhairle)
Link to this: Individually | In context

I propose to suspend the House until 4.30 p.m.