Tommy Broughan (Dublin North East, Labour)
Link to this: Individually | In context

Question 88: To ask the Minister for Finance the way the Anglo Irish Bank promissory note payment for 2012 is included in the national accounts; the impact on the primary deficit during 2012 if no such payment is made in 2012; and if he will make a statement on the matter. [35061/11]

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

In 2010 the previous Government issued promissory notes to a number of financial institutions, primarily Anglo Irish Bank. These promissory notes amounted to €30.85 billion - €25.3bn to Anglo Irish Bank, €5.3bn to Irish Nationwide Building Society and €250m to the Educational Building Society. The effect of this was to increase the General Government Deficit by €30.85 billion or 20% of GDP in 2010. The reason the full amount of these promissory notes was included as part of the General Government Deficit in 2010 is because EUROSTAT rules require that the impact on the general government accounts be recorded in the year in which the obligation was recognised.

In terms of the cash payments which impact the Exchequer Borrowing Requirement, the promissory notes are being paid over to the financial institutions in annual tranches of 10% of the capital amount. The first tranche of €3.085bn was paid from the Exchequer earlier this year.

As the capital amount of €30.85bn has already been recorded in the General Government Debt and Deficit figures, the annual payments of €3.085bn do not impact any further on the General Government Deficit or Debt.

However, taking account of the promissory note structure and the phased payment of the monies due on the note means that there is additional accrued interest associated with the notes that must also be taken account of in the General Government Deficit and Debt calculations.

Taking account of the previous Government's agreement with EUROSTAT, an interest holiday for 2011 and 2012 was agreed. This means that the General Government Deficit is not impacted in 2012 by the promissory note payment, save for the very small impact of accrued interest due on the EBS note. It is currently estimated that the General Government Deficit is approximately 1% higher in 2013 as a result of the accounting treatment of the accrued interest payments.

If no such cash payment was made in 2012 the Exchequer primary deficit would, all other things being equal, be €3.085bn lower. However such a non-payment for 2012 would have no effect on the general government primary deficit because the capital amount of €30.85bn was recognised in the 2010 General Government Deficit.