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Dublin: 13 °C Tuesday 23 September, 2014

Varadkar: I don’t see why we should pay the €3bn promissory note next year

The government is trying to do a deal on Anglo debt to avoid having to pay the €3 billion in March -but the ECB is warning that it may not be possible.

Image: Laura Hutton/Photocall Ireland

MINISTER FOR TRANSPORT Leo Varadkar has said he does not believe the government should pay the €3 billion promissory note due to be paid to the former Anglo Irish Bank in March.

“We didn’t pay it last year, we issued a bond to allow us to avoid paying it, and I don’t see why we’d pay it this year,” the Minister said this morning.

The Minister was reacting to comments by the head of the European Central Bank Mario Draghi who raised doubts about whether it would be legal for the Irish government to do a deal on Anglo debt to avoid paying the €3.06 billion.

“I wouldn’t really have expected him to say anything different, frankly,” Varadkar told Newstalk Breakfast this morning.

“What he’s doing there [with his comments] is saying there’s a lot of good will, we want to do something for Ireland, but [he] can’t do something that’s illegal or goes against the treaties”.

The Minister said that he was speaking only for himself but that it “wasn’t acceptable” to pay the €3 billion in March of this year “so I imagine we’ll be in the same place next year”. He said:

Whatever arrangement is found to refinance the promissory note or restructure the promissory note,  it has to do what we want it to do, which is to ease our debt burden and make the payments of debts more sustainable –  but from the point of view of the ECB, it has to not be or appear as though it’s the central bank handing a government money because that just isn’t what it’s allowed to do.

Leo Varadkar’s comments echoed Taoiseach Enda Kenny who said last month that the Minister for Finance is looking for ways to not have to pay the €3 billion in March.

The promissory note was used by the government to fund the Irish Bank Resolution Corporation – formerly Anglo Irish Bank and Irish Nationwide – when the financial institutions came close to running out of money.

The arrangement requires the State to make cash payments of €3.06 billion each year to the IBRC.

Days before the €3 billion promissory note was due to be paid in March of this year, Finance Minister Michael Noonan announced that the payment was to be deferred and was instead swapped for a long-term government bond.

Minister Noonan told the Dáil at the time that the long-term bond had a number of significant advantages over paying the promissory note immediately – including a significant cash flow benefit to the Exchequer in 2012.

Read: Silly diagram does a great job explaining what’s wrong with the Eurozone >

Read: Noonan defends PRSI increases as ‘best value taxpayers can get’ >

Read: Ministers say December Budgets could be a thing of the past >

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