Dáil Éireann Debate, Tuesday - 8 May 2012
150 Deputy Pearse Doherty asked the Minister for Finance the repayment schedule by IBRC for the exceptional liquidity assistance it has from the Central Bank of Ireland; and if he will make a statement on the matter. [22929/12]
Amharc ar fhreagraThe Deputy will be aware that while there is an implicit link between the current repayment schedule on the Promissory Note and ELA there is no specific repayment schedule, as such, in relation to ELA.
As 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 have agreed to engage in a process with Irish Officials to produce a common paper which will consider all options for restructuring the notes in terms of the source of funding, the duration of the notes, the interest rate etc.
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.
151 Deputy Pearse Doherty asked the Minister for Finance the impact of the promissory note interest on the general government deficit and debt for 2012, 2013, 2014 and 2015; the impact of the promissory note interest on the general government deficit and debt for 2012, 2013, 2014 and 2015; if IBRC was included in the definition of general government for the purposes of calculating the debt and deficits; and if he will make a statement on the matter. [22930/12]
Amharc ar fhreagraIn 2010 the State made out promissory notes to Anglo Irish Bank, INBS and EBS. These notes effectively promise to pay €30.85 billion to these institutions over a number of years. Under Eurostat rules, Ireland was required to count the original note as deficit and debt impacting in 2010. Ireland's deficit and debt therefore increased by €30.85 billion in 2010 as a direct result of the promissory note agreement. As a consequence of this ruling the annual payments of principal, whether paid in cash or any other means, do not increase the debt and deficit as this amount has already been taken into account.
The interest due on the promissory note however does increase both deficit and debt. For this reason, the previous Government requested an ‘interest holiday' in 2011 and 2012. For these two years a zero rate of interest applies on the Anglo and INBS promissory notes. This means that for 2011 and 2012 there was no additional impact from the interest on the Promissory Notes on the General Government deficit. The impact on 2013 is almost €1.9 billion, or 1.1% of GDP, with a declining impact in later years as shown in Table 1 below.
The impact on the debt is different from the impact on the deficit. This is because interest falls due on 31st March each year and debt is measured at face value, whereas deficit is accrued to the calendar year. This difference is further complicated by the interest holiday. Table 1 shows the impact on the general government deficit and general government debt of the promissory note interest for 2010 to 2015.
|
Year |
Impact on deficit |
Impact on debt |
|
€m |
€m |
|
|
2010 |
561 |
— |
|
2011 |
13 |
568 |
|
2012 |
13 |
13 |
|
2013 |
1,888 |
506 |
|
2014 |
1,780 |
1,847 |
|
2015 |
1,683 |
1,758 |
The IBRC is classified as part of the Financial Corporations sector and therefore is not directly included in the calculation of the general government deficit or debt. It was because IBRC is outside of the General Government sector that the promissory notes given to Anglo Irish Bank and the Irish Nationwide Building Society, the former entities that now comprise IBRC, were accounted for in the 2010 General Government deficit and debt returns.
