Written answers

Thursday, 29 April 2010

Department of Finance

Banks Recapitalisation

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Question 102: To ask the Minister for Finance the way the promissory notes issued to Anglo Irish Bank and Irish Nationwide Building Society are to be treated by EUROSTAT for the purposes of quantifying the general Exchequer deficit and national debt for 2010 and beyond; if he will confirm that promissory notes for €8.3 billion and €2.7 billion have been transferred to Anglo Irish Bank and Irish Nationwide respectively; the total expected 2010 interest payment for money raised for the purposes of injecting capital into Anglo Irish Bank and Irish Nationwide; the way these payments will impact on the commitment to make budgetary adjustments totalling €3 billion for 2011; and if he will make a statement on the matter. [17376/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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On March 31st this year the Government issued promissory notes to Anglo Irish Bank and Irish Nationwide Building Society for €8.3 and €2.6 billion respectively to help meet their capitalisation requirements over the coming years. Although the effect of this is to increase General Government Debt by €10.9 billion in 2010 there will be no actual drawing down of funds associated with these transactions in 2010. Consequently, there will be no additional interest costs incurred in 2010 as the transfer of funds from the Exchequer relating to the promissory notes will not begin until 2011. The reason the full amount is included in the 2010 General Government Debt figures - despite the fact that the money will not be borrowed in that year - is because accounting rules state that one must recognise a debt in the period in which it arises.

Until the details of the restructuring plans of these institutions have been agreed with the European Commission, the precise impact on the General Government Deficit will not be clearly known. As such, these promissory notes have been classified as financial transactions, and hence are not included in the General Government Deficit for 2010. When further information is available, this decision can be reviewed. The Government remains committed to the Budget day target to reduce the deficit to below 3% of GDP by 2014 and as such the budgetary targets for this and subsequent years remain unchanged and are unaffected by these recapitalisation plans.

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