Tonight at 8pm in Charleville there will be an event to mark the 100th week of bank bailout protests by the communities of Ballyhea and Charleville – it’s free and promises to be an entertaining and enlightening evening. And after the Reuters exclusive this afternoon, it promises to be electrifying particularly if the Fine Gael TD, Deputy Peter Mathews speaks, as was announced by lead-organiser Diarmuid O’Flynn on the Claire Byrne show on RTE Radio 1 today.
One of the original demands by the Ballyhea and Charleville protesters was that there be a complete stop to the repayment of bonds in our bust banks. There are a number of reasons for taking that aggressive stance but “possession being nine tenths of the law” was one. If the cash wasn’t transferred from our banks, then we would have a stronger position in one sense, even if it would generate legal action by burned bondholders,
This Government’s policy has been to try to work consensually with the ECB in alleviating the burden of the bank bailout, and burning the senior bondholders was certainly on the agenda; after all, that’s precisely what Minister Noonan announced when he was on a visit to the IMF in Washington in the summer of 2011. But the ECB rejected this approach and so we have 100% repaid unguaranteed and unsecured bonds in our banks, including about €4bn in Anglo and Irish Nationwide Building Society, since the start of 2011.
The consensual approach has taken a knock this afternoon with Reuters exclusively reporting that the ECB has rejected the Irish government’s proposal to alleviate the burden of repaying the €31bn of promissory notes in Anglo, INBS and EBS. Reuters reports “sources familiar with the talks” saying today that the Irish preferred solution has been rejected. We don’t know what the preferred solution was, and if there were alternative solutions and what those are and if they are still “alive”. However, on 16th January 2013, the governor of the Central Bank of Ireland appeared before the Oireachtas finance committee and alluded to “an initiative” – in the singular – which would be “novel…, while not taking other decision makers too far out of their comfort zone”. The Governor said
“Taking into account both the statutory position and wider policy stance of the ECB, an initiative of this type will be novel and, as such, challenging. Using our knowledge of central banking law and practice, we have been working carefully to build understanding and confidence around a set of proposed transactions designed to deliver for Ireland, while not taking other decision makers too far out of their comfort zone. The ECB is an organisation that seeks to proceed as far as possible by consensus, and it is not surprising that this work has been taking quite a while. In fact, what we have designed from our side is, I believe, largely in the interests of the euro system as a whole. On work in progress, I have nothing to add today to what has already been said by the Minister for Finance about the prospects and timing of the conclusion to these discussions.”
Despite the general mood music of there being “no doubt “ about a debt deal, and the “confidence” which has been promoted at parliamentary party meetings, the view on here remains skeptical. Remember, Ireland is not unique and there are other countries who want to alleviate their own bank bailout burden also, and the ECB risks opening the floodgates if it approves an individual way-forward for Ireland. After all, other countries might legitimately point to the EU communiqué last June which said “similar cases will be treated equally” – always remember that any proposal that comes our way might have a cost to Ireland because we are not alone in our problems despite the scale and severity.
What now for the promissory note deal which needs to happen in the next nine weeks if the 31st March 2013 payment is to be avoided? We don’t know, the Irish Department of Finance is not commenting this afternoon.
UPDATE: 26th January, 2013. Sean Whelan at RTE is reporting that he has obtained a comment from the ECB, though it remains the case that Irish “interlocutors” are not commenting. The ECB has said that no deal has been rejected, and it seems from sources that there might be a prospect of “tweaking” the preferred Irish option. It’s all very muddy.