February 10th, 2012, 04:37 PM
In the brig
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Irish IOU Deal Just 'Weeks' Away
A deal to lessen the burden Ireland faces in paying down €31 billion ($41 billion) in promissory notes, or IOUs, the Irish government has pledged for broken banks such as Anglo Irish Bank Corp., will be struck "in the next few weeks", providing a major boost for the country to emerge from its bailout and regain market funding, a senior Irish government minister said Thursday.
In an interview with The Wall Street Journal, Communications Minister Pat Rabbitte said that some sort of restructure will be agreed with the country's bailout lenders before the next annual repayment of the IOUs falls due next month.
Since last September, the Irish government has been seeking to restructure the IOUs in agreement with the country's lenders—the European Union, International Monetary Fund and the European Central Bank.
The promissory notes were injected into Anglo Irish and Irish Nationwide Building Society, now renamed the Irish Bank Resolution Corp., over two years ago, as a way of keeping the dud banks from immediate collapse.
"They [the IOU notes] are hugely important. It is a huge yearly budgetary factor for ten years that we are required to come up with €3.1 billion in terms of repaying the arrangement put in place by the promissory notes. And a restructuring of that it seems to me is absolutely critical," Mr. Rabbitte said.
Mr. Rabbitte is a senior member of the governing Labour party in the Irish coalition government that swept to power almost a year ago. The coalition had pledged to renegotiate the cost of Ireland's bailout and steer the country back to market funding.
He said he expected the restructure to be concluded by next month, freeing the government from paying an instalment of €3.1 billion.
"A lot of work has gone into it. [Irish Finance Minister] Michael Noonan has invested a lot of work in it. The signs are propitious," he said, without specifying what those signs were.
"There are reasons to be optimistic that the Irish government does not have to pump in another €3.1 billion."
He said it was impossible at this time to say how the restructure will take place.
"You certainly are going to have an arrangement like a mortgage. I hope it will be restructured over 30 or 40 years. We will see. There are a number of different angles that are being pressed for many months now," he said.
"Obviously, if a couple of payments were skipped it would be very helpful in the straitened circumstances in which we find ourselves. All of that is to play for," said Mr. Rabbitte.
He said that the test of the bailout program will be Ireland regaining market funding. "The whole point of being on a support program is market access. Our objective is to get back to the markets as early as may be," he said.
But Mr. Rabbitte said the euro crisis had slowed Irish economic growth. "It is a big ask," he said. "There is a big mountain to climb. The growth that the economy demonstrated in two quarters last year sharply abated as a result of the crisis in the euro."
"There is no doubt that the difficulties that surrounded the euro and the slow cycle race to resolve it has been problematic and has had a serious impact here. So, a great deal depends on stabilization of the euro," he added.