Ireland may seal an accord by the end of the year to refinance bailout funds injected into the former Anglo Irish Bank Corp., said Lucinda Creighton, European Affairs Minister.
“It is possible that a debt deal specifically relating to our promissory notes could be arrived at by the start” or during Ireland’s six-month term at the head of the European Union, which begins in January, Creighton said in an interview yesterday in Dublin. “There is every possibility.”
Ireland nationalized Anglo Irish in 2009, and injected 31 billion euros ($40 billion) into the bank and rival Irish Nationwide in the form of so-called promissory notes. The lenders, which merged last year, use the notes to access cash from the country’s central bank, which is due to be paid back over more than a decade.
The government of Prime Minister Enda Kenny argues that a deal to lessen the burden of the debt will aid a full return to international credit markets after the nation’s 2010 bailout. Yields on Ireland’s benchmark 2020 bond rose 2 basis points to 4.76 percent today, down from 7.4 percent at the start of June and 14 percent in July of last year.
The government is considering injecting as much as 40 billion euros of notes of as long as 40 years in duration into the bank, according to a person familiar with the talks in September. The plan would avoid the Irish state having to raise at least 3 billion euros a year for the next decade to pay down the central bank borrowing.
A 40-year government bond is “a good option,” Creighton said. “It is one that would essentially assist us very much in terms of our debt sustainability and would mean over time the burden on the state would diminish relative to GDP as our economy grows.”
Ireland will take over the EU presidency as the euro-area wrestles with putting the European Central Bank in charge of lenders within the currency union and other participating nations. Cyprus, the current holder of the rotating six-month presidency, is drawing up the legislative framework for the supervisor.
EU leaders have said a common bank supervisor must be in place before they can consider allowing banks to receive direct aid from the bloc’s bailout fund. Ireland will inherit that coordinating role and face the task of getting the supervisory mechanism “up and running,” according to Creighton. Regardless of the presidency, the government will pursue a bank deal for Ireland with “absolute determination,” she said.
Ireland may also seek refunds from the euro region’s new rescue facility, the European Stability Mechanism, to cover the 30 billion-euro cost of bailing out the rest of the financial system, including Allied Irish Banks Plc (ALBK) and Bank of Ireland Plc.
While Irish banks don’t need further capital, the sale of stakes in lenders to the ESM is “certainly” one option, Creighton said.
“There is a distinct understanding among EU capitals that we have fulfilled all our obligations under the troika program, that we are poised to become the first country to re-enter the markets, to be the success story,” Creighton said. “They want us to achieve that.”
Ireland is budgeting to spend about 64 million euros on its presidency, about a third less than when it last held the role during its economic boom in 2004. Ministerial meetings will take place in Dublin at state-owned properties, as will most of the high-level official meetings, according to Creighton.
“It won’t be presidency of bells and whistles, it will be a more sedate affair in terms of at least the trappings,” according to Creighton, who said the emphasis will be on substance. “I’m very optimistic on what we can deliver.”
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