I know that what is happening at IBRC right now sounds pretty complicated to some of you, but practically all of you will know that most deals can be improved. This blogpost examines how the IBRC scheme as presently described can be improved.
The number one fear at the ECB is that Ireland will renege on the promissory notes, and as the Irish saying goes “you might as well be hanged for a sheep as a lamb” so if we reneged on €26 of the promissory note, it would be the same as reneging on €26bn. The ECB is highly concerned that the promissory notes can be reneged on and that the ECB will be legally exposed to a massive loss. The ECB recognizes that the promissory notes were IOUs from a democratically elected minister of Ireland and that they are backed up by so-called “letters of comfort” but the ECB is concerned that there might be some reneging, and that “some reneging” might quickly lead to an utter rejection of the promissory note debt.
The main way by which the IBRC scheme can be improved, is to renege or threaten to renege on the €27bn of extant promissory notes. This course of action will carry risk, and there will be dire threats in retaliation. The ECB is lending €70bn to our banks directly, including Bank of Ireland, AIB and Permanent TSB apparently. The ECB might seek higher interest on its lending. The ECB ultimately has the power to collapse our banking system. Solidarity with our European partners might deter extreme action. We can argue about the legal niceties but without banks, we might be too busy hiding in cellars with tinned food to deal with the niceties of court action. So there are risks but there are huge potential rewards also.
As recommended on here a year ago, because the status of the promissory notes is the ECB’s Achilles Heel, and we should be pounding on it relentlessly.
These are the days in which Ireland can save billions and maybe €10bn+.