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Dáil Éireann debate -
Thursday, 24 Mar 1988

Vol. 379 No. 5

Ceisteanna—Questions. Oral Answers. - National Debt.

15.

asked the Minister for Finance if he will consider renegotiating with the Irish banks in relation to that portion of our national debt which is held by the associated banks, with a view to reducing the rate of interest thereon.

No. National debt issues are contractually binding on the State and there is no question of attempting to renegotiate those terms and conditions of a contract which are fixed. Only in so far as some foreign currency loans to the State contain provision for prepayment or refinancing at the discretion of the State before the full term of the loans expires are the terms of such borrowings capable of legitimate adjustment.

While I accept the onerous contractual obligations on the State in this regard, let me ask the Minister, especially when the bank profits to be announced in May of this year are, to the best of my information, to be more successful than ever with higher profits for the banking groups as in the last number of years, whether the Government have considered this question. Has any advice been given to the Minister from his advisers in the foreign debt section of the Department of Finance? Have the Government considered this question at all? While I accept the contractual obligations, it is not unknown for people to renegotiate. Have this Government discussed this question or has the Minister received any advice as to whether it is possible?

The answer is "no" to all those because they do not arise. I cannot deal specifically, as the questioner intends, with the associated banks because we have banks, insurance companies, pension funds, building societies etc. The information I can give to the Deputy in relation to domestic debt and the licensed banks is that the licensed banks are required by the Central Bank to hold a specified minimum proportion of their resources almost entirely in Government paper. The associated banks — the AIB, the Bank of Ireland, the Northern Bank and the Ulster Bank — were holding £1,943.9 million which was £507.5 million more than the required minimum in Government paper, that is gilts and Exchequer bills, at 31 December 1987. This represented 11.7 per cent of the domestic debt and 7.4 per cent of the national debt at that date.

Would the Minister not accept that if both parties to these contracts agreed, it would be possible to renegotiate to reduce the levels of interest?

One cannot do that in relation to dealings that take place on an hourly basis every day on the Stock Exchange in Exchequer bills and gilts where all sorts of financial institutions, national and international, deal. As I said, we have not just the associated banks, we have insurance companies, pension funds and building societies. It would be impossible to do as the Deputy says. He has a point but it would be just impossible to organise a system to cater for what he mentions in his question.

Would the Minister not agree that, as is implicit in Deputy Spring's question, other people are willing to lend money to the State at a lesser rate? Would it be desirable if Deputy Spring knows of such other people who are willing to lend on variable rates of interest that he should inform the Minister of this?

I would not accept that that was implicit in the question, but the people who deal on the State's behalf, on behalf of this Government and the previous Government, do an excellent job and will not give away one-tenth of 1 per cent interest any day unless they have to to finance what we need to run the Exchequer commitments. I pay a great tribute to them for the work they do today and every other day, and which they have been doing for a number of years, considering the debt we have incurred in the past 20 years.

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