Ireland currently owns €30 billion in promissory notes to a bank that doesn’t exist anymore. Since Anglo Irish Bank was wound up, a new bank was created called Irish Bank Resolution Corp (IBRC) and used these promissory notes to borrow from the Irish Central Bank. As the first part of these promissory notes have come due for repayment (€3.1 billion) at the end of the month, the Irish Central Banker (Patrick Honohan) is being reported by Bloomberg as being ready to go to the ECB tomorrow and ask to restructure these into bonds instead. So now we will have the situation where they will be paid back at a later dates as bonds and the ECB who will own these bonds will presumably make a hansom return on them.

That’s how you get the irish taxpayer to increase their debt and give the central bankers a nice little profit in return. What must be pointed out is currently Honohan can get the promissory notes written off if he gets one third of the eurozone central bankers to agree. He has refused to do this or even discuss this ideal solution.

Of course this debt restructure will be spun to the irish public as a triumph to sweeten the voters before the referendum shortly. Funny how they never bothered to do this before now. WE MUST BALANCE THE BOOKS MUSTN’T WE 😉 (despite the fact that the Irish Central Bank printed the money from fresh air in the first place).

 

Irish Central Bank Governor Patrick Honohan will probably ask the European Central Bank Governing Council tomorrow for permission to effectively delay a cash payment on its banking debt, as the country tries to ease the burden of saving its financial system, said two people with direct knowledge of the matter.

The state is due to make a 3.1 billion-euro ($4.1 billion) payment to the former Anglo Irish Bank Corp (ANGL)., which is then supposed to use the funds to reduce its emergency borrowings from the country’s central bank. Instead, the lender may use the funds to buy a new Irish government bond, meaning no net cash outflow from the state. The bond can be used to tap funding from the ECB, the people said.

The concession may facilitate a longer-term effort to cut the cost of Ireland’s banking rescue, which helped tip the nation into an international bailout in 2010. The Irish government is seeking European help to restructure about 30 billion euros of so-called promissory notes used to rescue the former Anglo Irish.

The state needs to do so in a way that leaves the net impact on the money supply at zero. Otherwise Ireland’s central bank could be accused of printing money, a policy opposed by the ECB.

……

At the moment, the government pays 3.1 billion euros each year to the bank. Broadly, IBRC uses that money to pay off its central bank borrowing. To neutralize the impact on the money supply, the central bank would then cancel those funds.

By going ahead with the cash payment, Ireland is sticking to its commitment to IBRC, avoiding a default even though the bank may use the funds to buy a sovereign bond.

Ireland’s October 2020 bonds, regarded as the benchmark, yielded 6.8 percent today, down from 9.1 percent at the start of December.

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