Minister for Finance, Michael Noonan stood up in the Dail shortly after 4pm today to make a special announcement regarding the renegotiations of the Anglo promissory note arrangement which was set to cost the State €3.1bn in cash in the next two days. The Minister’s statement is here and was delivered with An Taoiseach Enda Kenny sitting alongside. Immediately after the statement was delivered, Fianna Fail’s finance spokesperson Michael McGrath and others sought a debate on the announcement, but the Comhairle disallowed the request but suggested the party whips might agree that time be taken from today’s business. An hour later, and it seems that the whips were unable to agree a slot. So right now, all we have is the Minister’s statement. So what do we know
(1) NAMA will use €3.1bn of its €4.3bn cash reserve to buy an Irish “long-dated” government bond, it will presumably be a 2025 bond.
(2) The Govt will give the €3.1bn it gets from NAMA to give to IBRC (the new name for the Anglo/INBS merged entity)
(3) IBRC will give the €3.1bn to the Central Bank ofIrelandto whom it owes €41bn, and the Central Bank will take the €3.1bn outside, douse it with lighter fluid and set it ablaze, or whatever the electronic equivalent is of destroying money which the Central Bank created to lend to Anglo on the strength of Anglo’s promissory note.
It is hoped that Bank of Ireland which the Government partly controls through its 15% shareholding will buy the bond from NAMA, and exchange the bond with the ECB, but
(1) Bank of Ireland, which is majority controlled by the private sector including the trio of North American investors who bought into the bank last summer, hasn’t agreed to buy the bond.
(2) The ECB hasn’t seemingly agreed to lend Bank of Ireland cash if Bank of Ireland does buy the bond.
In other words, what is happening is the Government is taking €3.1bn from NAMA to pay off the €3.1bn promissory note payment that now falls due. The Government has failed to agree anything it seems with anyone. Save with NAMA which the Government controls despite all the blather about NAMA’s independence. It is unclear how NAMA can buy this bond which is a colossal undertaking for NAMA, an entity that operates under the NAMA Act and the European Commission approval of the NAMA scheme. Did the European Commission foresee NAMA lending billions to the Irish government under the scheme approved in February 2010? Absolutely not, and it is unclear how NAMA can, under the terms of the NAMA Act, buy billions of euro of bonds which may mature in 2025. This “deal” smacks of last minute panicking and it seems nothing has been agreed or conceded by the IMF, ECB or EU.
Expect more on the Promissory Note deal here later.