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Noonan chases Irish version of Greek deal on ECB profits

Any profits the ECB makes on buying Greek bonds are given straight back to Greece – and Ireland may look for similar.

Mario Draghi and the ECB wouldn't need to approve any new deal about the bank's profits from Irish bonds.
Mario Draghi and the ECB wouldn't need to approve any new deal about the bank's profits from Irish bonds.
Image: Yves Logghe/AP

Updated, 13:01

MICHAEL NOONAN has suggested that Ireland’s next mission with European leaders will be to try and get them to hand over the profits they might make from any Irish government bonds owned by the European Central Bank.

The finance minister has said Ireland is looking closely at a concession given to Greece, to see if similar arrangements could be sought by Ireland as it looks to draw the line under its EU-IMF bailout.

An agreement struck by Eurozone finance ministers in November sees each member state agree to forego the profits that they should receive because of the ECB’s investment in Greek government bonds.

The ECB’s ‘securities market programme’, which was particularly active in 2010, saw the Frankfurt-based bank become an active player on the second-hand bond market – hoovering up bonds issued by Eurozone countries in an effort to keep the cost of borrowing artificially low.

The bank currently owns €205 billion worth of bonds issued by Ireland, Greece, Portugal, Italy and Spain – with its portfolio of Irish bonds carrying a total face value of €14.2 billion.

Ordinarily, any profits made by the European Central Bank are distributed to national central banks, and then on to each national government – but last November leaders agreed to a deal where ECB profits on Greek bonds are instead distributed solely to Greece.

The deal effectively means that Greece is able to borrow at no cost – because the interest that it pays on its borrowings is given directly to the bond’s owner (the ECB) and is then given straight back to the government.

While Noonan says Ireland’s needs are different to those of Greece, it was “examining the Greek package to see if aspect of it offer any possible benefit to Ireland”.

In response to written Dáil questions from Labour’s Dominic Hannigan, he added that the examination would be “in the context of our programme exit.”

The deal reached for Greece in November also included a lowering of the interest rate on Greece’s European bailout loans, and an extension of the repayment period for the loans.

Ireland is currently seeking a similar extension of its repayment schedule, along with Portugal, the other Eurozone country currently in a bailout.

Though the deal would involve the reassignment of ECB funds, ECB approval is not needed for the arrangement because the deal simply involves a commitment from individual governments to reassign their part of the ECB’s profits.

Read: Noonan: Europe now owes Ireland after ‘taking one for the team’

About the author:

Gavan Reilly

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