While everyone is conveniently busy not paying the Household Charge by the 31st March, the clocks are ticking towards the same deadline for payment of a €3.06 billion promissory note for Anglo-Irish Bank.
Fortunately, as reported by the Journal.ie, Finance Minister Michael Noonan told the Dáil last week that:
The discussions with the European authorities on the general issue continue but we are now negotiating with the EU authorities, and principally with the ECB, on the basis that the €3.06 billion cash installment due from the Minister to IBRC on 31 March 2012 under the terms of the IBRC promissory note could be settled by the delivery of a long term Irish Government Bond. The details of the arrangement have still to be worked out.
We can set aside the details for one moment. Well, actually, we can’t. Obviously, capital owed for a longer period attracts more interest and becomes more expensive and, if this happens, the government will now have ensured that (a) rather than achieve a write-down of the promissory note it will cost even more, and, (b) it has successfully begun to convert it into fully blown sovereign debt as well.
As the Journal.ie also notes:
The surprise move, if it comes to fruition, would be quite a coup for the Government as it would avoid making the controversial payment on 31 March.
The bond which would be issued in place of the payment would not have to be paid until 2025. Therefore, the State would have another 13 years to pay back the €3.06 billion debt.
While no formal announcement has been made confirming this new ‘deal’, the Central Bank governor Patrick Honohan is to go in front of the Oireachtas Finance Committee today to answer questions about the same Anglo-Irish Bank promissory note and may provide further clarification.
Some people are suggesting the Central Bank governor may not confirm either way as the Taoiseach might want to hold over any actual announcement until his own address at his party’s Ard Fheis this weekend, which thus, also, happens to coincide with the deadline for the Household Charge and the payment of the €3.06 billion debt. The Ard Fheis is taking place in the Dublin Convention Centre, which has a NAMA-appointed receiver. A Fine Gael source has pointed out that:
The Convention Centre has been booked for a very long time, so the fact that the date coincides with two such provocative issues is just bad luck.
Indeed. It could be even worse luck. David Hall, founder of New Beginnings, has taken a constitutional challenge against the Anglo-Irish Bank promissory note on a number of points. The one that may have most traction is a very straightforward one: the relevant legislation, the Credit Institutions (Financial Support) Act 2008, gives the minister powers up to 2016 yet a €3.06 billion promissory note payment is due each year until 2023 (i.e. before the proposed scheme to extend until 2025).
If the judicial review is permitted and the promissory note is deemed unconstitutional, just as Fine Gael hold their Ard Fheis in a NAMA building on the day when a million or more families simply disregard the government’s Household Charge, it’s not clear what will happen next. Well, actually, it is.
April Fools’ Day.