29 February 2012

FT: Irish minister pushes to cut bailout cost

Joan Burton, Ireland's minister for social protection, said the EU should restructure €31 billion in promissory notes issued by Dublin in 2010 to cover the cost of winding up Anglo Irish Bank, the institution at the centre of Ireland's financial crisis.

Ms Burton said the notes should be extended over 50 years to cut the cost to the exchequer during its present difficulties. Ms Burton made the call as battle lines were drawn in a referendum campaign that offers European voters the first chance to pass judgement on a treaty enforcing tighter budget discipline to try to shore up the euro currency.

If Irish voters reject the treaty, Ireland could lose access to the eurozone’s permanent bailout fund, jeopardising its return to bond markets and potentially threatening its membership of the single currency. “The countries of the eurozone are entering into a deeper arrangement in relation to cooperation solidarity and so on”, Ms Burton said. “If we decide to opt out of that we have opted out of that arrangement, and therefore we are fundamentally changing our relationship to the eurozone.”

Under a deal struck with the EU authorities, Dublin must pay €31 billion over 10 years to cover the cost of the promissory notes issued to cover the cost of winding up Anglo. When interest charges are included, the total cost to the exchequer is estimated at €47 billion. The next €3.1 billion instalment is due on March 31, just before the referendum on the treaty that will probably be held in late May or early June.

Dublin has previously asked the EU authorities to renegotiate the promissory notes and technical work has been taking place for several months. However, Dublin has so far received no firm indications that the EU authorities will provide any relief. Ms Burton said a move by Europe on the promissory notes would be very helpful in the referendum campaign and would be noted by the Irish people. She said it would also benefit Europe, which could point to Ireland as a success story.

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