There will be no substantive debt deal for Ireland (but there’s plenty of goodwill)

Question: “in light of the commitments made by the Irish government and borne by the Irish people, is it reasonable or not at this point to expect that there will be an agreement to recast the Anglo-Irish Bank promissory note scheme before the next payment falls due in March, and why?”

Answer: “I think we have discussed this in the past. The ECB cannot undertake any agreement, cannot enter into any agreement that is being viewed as monetary financing and is forbidden by Article 123 of the Treaty. But other than that, there is plenty of good will.”

The above exchange took place in Frankfurt yesterday at the press conference following the monthly meeting at the ECB where interest rates are set. The questioner was the Irish Times journalist, Arthur Beesley and he was questioning the president of the ECB, Mario Draghi. The Irish Times was the only organization, seemingly, to field a journalist at yesterday’s news conference but if you look back over the past 15 months, there were monthly attempts by the Independent’s Laura Noonan to get some reassurance from the ECB that the elusive prize of a debt deal for the historical cost of Ireland’s bank bailout, would ultimately come to pass.

“I do not want to see a situation where we have to pay out in excess of €3 billion next March, as is the requirement following on the introduction of promissory notes. Deputy Adams is aware of what the Government did this year in respect of the payment which was due in March 2012. I am being serious with Deputy Adams. Some very clear discussions have taken place and are taking place at ECB level with our Minister for Finance and his officials. We have had support for a restructuring of that from many quarters which are not just confined to Europe but beyond” said An Taoiseach, Enda Kenny in the Dail on Wednesday this week.

It seems the “clear discussions” with the ECB have resulted in a position of complete negativity from the president of the ECB. And you can’t finance a country with “goodwill”

Remember that it has been 15 months since Minister for Finance, Michael Noonan had those discussions/negotiations with former ECB president,  Jean Claude Trichet and that subsequent talk of “technical papers”, “reengineering”, “complicated” matters have resulted in no agreement. And it has been five months since the June EU summit with Enda Kenny claiming to be a “hard grafter” and that “some of them found out tonight that I shouldn’t be tangled with too often” whilst An Tanaiste talked about a “game changer”. More seriously, there was a commitment from the EU that “similar cases would be treated equally”. Since then, Greece has seen another debt writedown and Spain has obtained a €39.5bn bank bailout without fiscal conditionality on the country.  And of course previously, Portugal saw a reduction in its bailout interest rate without having to agree to enter into constructive discussions on its corporate tax arrangements.

It has been observed on here recently that German politicians when questioned about their attitude to a debt deal for Ireland seem to use almost identical phraseology in their responses, which (a) acknowledge the scale of the bailout and the burden placed on the shoulders of each individual (b) sympathise with our motivations and the assistance and support given by our country to the European banking system and (c) offer very vague suggestions of a nebulous deal. All the time, bonds in bust and bailed out banks continue to be paid, and we paid the €3.1bn Anglo promissory note this year with an Irish government bond, which converted a private bank debt to a sovereign debt.

It’s time to be realistic – there is no Santa Claus in Europe who will gift free money to Ireland for historical actions. It is ridiculous to even contemplate EU partners entertaining “poor mouth” requests for a debt deal from some of the highest paid politicians and civil servants in Europe. The best we will get from Europe is “goodwill”, something the ECB gives all its members, and probably gives more to other countries which don’t pester it on a monthly basis with pesky questions about a deal to which we have no right.