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Sunday 10 December 2023 Dublin: 9°C
Sasko Lazarov/Photocall Ireland
Promissory Note

Noonan hints €1bn IBRC savings will go to repay debts

Michael Noonan thinks it would make more sense not to use the promissory note proceeds to ease the next Budget.

MICHAEL NOONAN has given the clearest hint yet that the €1 billion annual saving to the Exchequer arising from the liquidation of IBRC, and the exchange of promissory notes for government bonds, will not be used to ease the burden of the next Budget.

Noonan has said that while he is not willing to begin speculating on the contents of Budget 2014, there remains a “significant gap” between the amount that the government spends each year and the amount it takes in.

“In addition to the requirements to bring our deficit to under 3 per cent of GDP by 2015,” in line with EU requirements, “it makes sense that we bring balance back to the public finances and stabilise and reduce our debt burden,” Noonan said.

He added, however, that there were “other moving parts to be considered” in the compilation of the next Budget such as economic growth and the Exchequer’s tax take, in written responses to Dáil questions from Fianna Fáil’s Michael McGrath.

Though the IBRC liquidation does not result in any particular savings for 2013, as the savings from the promissory note deal are used to fund the one-off costs of winding down IBRC, the interest on the long-term government bonds will cost about €1 billion a year less than the €3.1 billion promissory note repayments.

Labour ministers have called for the reduced costs to be put towards easing the austerity measures required in Budget 2014, which are due to amount to €2 billion in spending cuts and €1.1 billion in new taxes.

The European Commission has previously stated similar desires that Ireland should try to close its budget deficit as quickly as possible, and hinted that it would rather see the €1 billion savings used to bring Ireland back to a balanced budget.

“Market confidence in Ireland’s continued solid fiscal consolidation is essential for the country’s durable return to market financing,” the Commission said in its last report on Ireland’s bailout progress, and added that the implementation of the agreed Budget measures was “essential”.

IBRC deal ‘is not illegal’

In response to other questions from McGrath, Noonan said he was confident that the IBRC arrangement was legal within the boundaries of the EU treaties and would not fall foul of any later scrutiny by the European Central Bank.

“The Central Bank of Ireland has carefully examined the legal and financial issues involved in the transactions and is satisfied that there is no such breach,” he said, adding that he was not personally concerned about the possibility.

He also said he had first approached KPMG about the possibility of being appointed as a special liquidator to IBRC back in October, knowing that a possible scheme to eliminate the promissory notes could require the institution’s liquidation.

While it was not possible to carry out a tendering process for the liquidation for reasons of sensitivity, KPMG had been identified as the preferred liquidator based on response submitted to previous tenders sought by NAMA.

He further added that there were no immediate plans to amend the IBRC Act to lift the stay on all court proceedings taken against IBRC, but declined to make any further comment while the courts considered the question of whether they had the discretion to lift any such stay.

Submissions will be heard at the High Court on March 7 to determine whether existing laws give the courts the discretion to lift the stays on matters involving IBRC, including the case taken by the Quinn family challenging the amount it owes the institution, and allow those matters to continue their progression through the courts.

Read: Varadkar: Promissory note saving ‘is not €1bn more we have to spend’

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