Agreement with the ECB on the Promissory Notes

The deal:
Ireland has reached a conclusion to its discussions with the European Central Bank.
This will deliver a fairer and more sustainable arrangement to our banking debt in terms of the Anglo promissory note.
Fine Gael and Labour promised to renegotiate the bail-out programme inherited from the previous Government to secure a more affordable solution to our banking and sovereign debt crises.
We committed to replacing short-term, emergency Central Bank lending secured against the promissory notes with longer-term, more affordable financing.
The aim of this is to reduce the burden on Irish taxpayers. Today that aim has been achieved.
The promissory note arrangement would have seen Irish taxpayers pay €3.1 billion next March and every March until 2023, and declining payments until 2031.
This was to cover the massive private losses of Anglo Irish Bank and Irish Nationwide.
The lifetime cost of the promissory note would have been almost €48 billion, including interest costs.
The annual Promissory Notes payments are now gone.
The Central Bank is to assume full ownership of the €25 billion in promissory notes and other collateral held as security for the funds provided by the Central Bank to the IBRC.
Under this agreement, the promissory notes are being exchanged for long term Irish Government bonds with maturities of up to 40 years.
In addition to this, the liquidation of the Irish Bank Resolution Company, as legislated for by the Oireachtas this morning means that the remnants of Anglo Irish Bank and Irish Nationwide have now been removed from the financial and political landscape.
Their closure bookends a tragic chapter in our country’s history.

The payments:
The first principal payment will not now be made until 2038.
The last payment will be made in 2053.
The average maturity of the Government bonds will be over 34 years as opposed to the 7 to 8 year average maturity on the promissory notes.
We have replaced a short-term, high interest rate overdraft that had to be paid down quickly through more expensive borrowings, with long-term, cheap, interest-only loans.
The liquidation of the IBRC has caused the Central Bank to take ownership of the €3.4 billion bond used to settle the promissory note last March.

The result:
There will be a €20 billion reduction in the NTMA’s market borrowing requirements in the next decade as we seek to restore the economy to full employment.
There will be a very large reduction in the debt servicing costs of the State over the next generation.
The average interest rate on the new bonds will begin at just over 3%, compared with an interest rate of well over 8% on the promissory notes.
This will result in a reduction in the State’s General Government Deficit of approximately €1 billion per annum over the coming years.
This will bring us €1 billion closer to attaining our 3% deficit target by 2015.
This means that the expenditure reductions and tax increases will be of the order of €1 billion less to meet the 3% deficit target.
This plan will lead to a substantial improvement in the State’s debt position over time.

The economy:
This is no silver bullet to end all our economic problems.
There is still a long way to travel in our country’s journey back to prosperity and full employment.
The damage done by these financial institutions will take many years to rectify.
A very large and unsustainable gap between Government revenues and spending still remains to be fixed.
This is a gap that is unrelated to our banking crisis. Only we in Ireland can fix this problem by reforming the way our State and country works.

The future:
Today’s outcome is an historic step on the road to economic recovery.
It will reduce the burden on Irish taxpayers arising from the bail-out of Anglo Irish Bank and Irish Nationwide.
Step-by-step, this Government is undoing the disastrous banking policies that brought this State to the brink of national bankruptcy.
The promissory notes in Anglo Irish Bank and Irish Nationwide served as a millstone around the neck of the Irish taxpayer.
This burden served to erode confidence and limit the economy’s ability to grow.
The new plan will likely materially improve perceptions of our debt sustainability in the eyes of potential investors in Ireland, leading lower interest rates and faster growth than would otherwise be the case.
A successful Irish exit from the bail-out by the end of this year would prove that a combination of intensive national reform efforts and European solidarity can deliver results.

The work continues:
We continue to negotiate to improve other core elements of the onerous bail-out deal inherited from the previous Government.
Today, we have secured a vastly better deal on the cost of bailing out Anglo Irish Bank and Irish Nationwide.
Tomorrow we continue our efforts to seek European assistance to recover as much taxpayers’ money as possible from the other financial institutions bailed out by the State.
Eurozone leaders, including Chancellor Merkel and President Hollande, have publicly recognized the unique circumstances behind Ireland’s sovereign debt crisis and have mandated the eurogroup to address these issues.
What today shows is that the more Ireland is prepared to help itself, the more others will assist us along the difficult path we still have to travel.
Today marks a step forward in accelerating our path back to economic recovery and renewed job creation.
It can give us confidence that our goals are achievable, that our hopes are realisable.
Today’s result has been brought about a strong and determined collective effort by the entire Government.
All Ministers are to be commended for their contribution to this outcome.