Belfast Telegraph

Tuesday 21 October 2014

New debt plan 'more sustainable'

The Governor of the Irish Central Bank said the national debt is more sustainable

Ireland's national debt is a lot more sustainable in the wake of the deal to restructure the state's long term repayment plan, the Governor of the Irish Central Bank has claimed.

Patrick Honohan said the arrangement with European banking chiefs over how to pay off the multibillion-euro debt racked up from the rescue of toxic lenders would not unravel.

He also denied reports that Taoiseach Enda Kenny and other ministers had rebuked him over the delays in securing the effective approval of the European Central Bank (ECB) during tense negotiations earlier this week.

"It seems to me that the national debt and its path is a lot more sustainable than it was before," said Mr Honohan.

"There's always risks, we have published many papers in the Central Bank showing where the risks (are), the scale of the risks. The risks are reduced by this week's development. It is very much within our own grasp to continue the policies that will allow this to be moved into a safer place."

The Government's Project Red saw 28 billion euro worth of costly IOUs - so-called promissory notes issued after the nationalisation of the failed Anglo Irish Bank - swapped for long-term sovereign bonds. These bonds will be issued through the Irish Central Bank.

The arrangement, which was backed by ECB officials after a meeting in Frankfurt on Thursday, will effectively see the state repay the debt of Anglo (which had been rebranded as the Irish Bank Resolution Corporation) over a longer period - a move that will reduce the size of annual payments.

The Government claims the deal could mean one billion euro in tax hikes and spending cuts can be avoided in upcoming budgets. It has also claimed it will wipe 20 billion euro off the total cost of Anglo.

Ministers and Irish Central Bank officials had to move quickly during the week after reports of the potential deal were leaked into the public domain in Europe.

This saw an emergency late night session in the Dail on Wednesday and required President Michael D Higgins to fly home from a state visit to sign the legislation, amid fears a delay would foster uncertainty among IBRC's existing bondholders.

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