Dáil Éireann Debate, Wednesday - 1 February 2012
6Deputy Micheál Martin asked the Minister for Finance the timeline that he envisages for conclusion of the discussions with the EU European Central Bank in relation to reducing the net cost of the bank recapitalisations; and if he will make a statement on the matter. [5629/12]
Amharc ar fhreagraAs I have indicated, I am committed to reviewing the approach to the promissory notes with a view to reducing the overall cost to the State of correcting the banking system. The troika has agreed to engage in a process with Irish officials to produce a common paper which will consider options for re-engineering the notes in terms of the maturity of the notes, the interest rate, the cash flows and so on. Any solution must be consistent with the orderly resolution of IBRC that is already under way. In tandem with this technical review, I recently met with Commissioner Rehn and the President of the European Central Bank, Mario Draghi, to progress the matter. Additional detail on such proposals will be available when the ongoing work is further advanced.
Given the nature of advocacy and the decision making process in the EU, I would not expect this matter to be concluded in the short term.
I thank the Minister for his reply. The purpose of the question is to establish the Government's objective in seeking to revisit the issue of bank recapitalisation costs. It is clear from the reply that the focus is on the €30.6 billion promissory note structure for the former Anglo Irish Bank and Irish Nationwide Building Society. As many commentators have pointed out and the Minister will, I am sure, agree, the core issue is not the coupon rate that is being paid. I am seeking to establish what objective the Government seeks to achieve through the technical papers, apart from the general aim of trying to ease the burden on the taxpayer, with which we all agree. Is the Government seeking a write-off or write-down of the capital amounts owing? Is it proposing a repayment holiday until the economy is in a much stronger position or a refinancing of the €30 billion sum over a much longer period at a cheap interest rate? Has it identified its preferred options? While I accept the Minister will not provide a great deal of detail, will he indicate what is the core Government objective apart from easing the burden on taxpayers?
The core Government objective is to enhance Ireland's capacity to repay its debts in order that we can get back into the markets when the programme is drawing to a close and fund at reasonable amounts. We wish to become a normal eurozone country, that is, one which is no longer involved with the programme. The primary objective is to enhance our capacity to repay. If anybody has a good suggestion on how we can achieve this objective, I will examine it. My suggestion to the European authorities for several months has been as follows. If the most expensive element facing us, namely, the arrangement by way of promissory note for the funding of Anglo Irish Bank, as it was known, were replaced by an alternative financial instrument of lower coupon and longer duration, the benefit arising would be that the markets, when they look at Ireland, would conclude that this particular obstacle has been relieved and the country's capacity to repay has been increased significantly. Given our capacity to repay, they would then decide they could lend to us again at low interest rates.
If I interpret the Minister's response correctly, the objective is to identify another financial instrument through which we can refinance the sum involved and repay it over a longer period at a cheap interest rate. This appears to be the essence of his reply. I assume, therefore, that the mandate given to the officials who are engaging with the troika is not to seek a write-down of the amount involved or defer the repayment until the economy is in a better position but to restructure it in the manner the Minister outlined. Is that the essence of the Government's position?
What I laid out for the Deputy was the negotiating position put forward by me initially and which has become the Government's position. The mandate to the representatives of the troika who are engaged in producing a common policy paper is to find ways and means, whatever they are, to enhance Ireland's capacity to repay debt and enhance our position as I have outlined. However, certain things have been ruled out. It is clear from the October summit that private sector involvement, PSI, will only apply to Greece. This was written into the agreement of the 27 member states at the October summit. Nothing of that nature will be involved. We are not talking about resiling in any way from our obligations.
The Deputy will appreciate that the arrangement entered into by the Fianna Fáil-Green Party Government for funding Anglo Irish Bank was an extraordinarily extravagant piece of financial engineering. In addition, taking an interest rate holiday has brought about a position in which the coupon is approximately 8.5% and stretches on for a long time. These decisions predated the bailout and were taken in the autumn of 2008 and early months of 2009 when the bailout programme was not in place.
As the coupon is going into a State bank, it is not the primary issue.
While it may have seemed sensible at the time, it is in retrospect the height of foolishness. However, we are stuck with it and must negotiate our way out of it.
The Minister asked for proposals. He will be aware that on 1 or 2 September I put a proposal to him on what should be done. As I knew he would not act on it, I subsequently put another proposal to refinance and deal with the capital costs through an extend and pretend arrangement. I accept the Minister is arguing the case for a version of this proposal. I will repeat a question I put to him during questions several months ago. Does he acknowledge that the interest rate is not the issue in respect of the coupon rate because the payments will stay in the State bank and be returned to the State when the bank is wound up? The real interest cost, which the Minister continues to deny, is the cost of borrowing €3.1 billion on 31 March each year and transferring it to Anglo Irish Bank. Given the Minister's statement that a resolution of this issue is unlikely to be found in the immediate future, should the State pay into Anglo Irish Bank the €3.1 billion that is due on 31 March or should the payment be suspended pending the outcome of the current discussions? Will the Minister publish the terms of reference of the troika technical group in respect of its deliberations?
Notwithstanding our significant differences on what should be done about paying off banks such as Anglo Irish Bank, bondholders and so forth, does the Minister agree that, in the context of seeking any relief on the debt burden, the Taoiseach's comments in Davos were stupid and reckless and undermined any moral credibility we have in seeking debt relief as he essentially stated we deserve what we are getting because people went mad borrowing?
The Deputy's question is not related to the question addressed to the Minister.
Did his comments not substantially undermine the Minister's negotiating position in seeking debt relief from our EU partners?
The Taoiseach was speaking conversationally in a question and answer session. If I told Deputy Boyd Barrett that the people of Dún Laoghaire believe he is the best public representative in the greater Dublin area, it would not mean every one of them stated that view. The Taoiseach's reference to "the people" is a manner of speaking. He did not mean that everybody in Ireland was to blame for what happened.
Was his statement reckless?
Some people in Ireland, at political, banking and developer level, were to blame for what happened. The Taoiseach used a colloquialism. An awful lot was made of a normal way of expressing oneself.
We will proceed to Question No. 7.
Will the Minister answer the questions I asked or is he avoiding them?
The Chair is independent in this matter.
I answered the Deputy when I replied to Deputy Boyd Barrett. It was the same issue.
