Promissory Note Arrangement: Statements

14 February 2013

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Promissory Note Arrangement: Statements

Thursday, 14 February 2013

Senator Ivana Bacik: I welcome the Minister of State to the House. I also welcome the opportunity to contribute on the important promissory notes arrangement agreement reached last week. As Senators on both sides of the House have acknowledged, this is an important step in Ireland's recovery. The arrangement will make our debt burden easier to bear.

Senator David Cullinane expressed a great deal of negativity, as have others in Sinn Féin, but there was a degree of unreality about his comments. I took a careful note of them. He stated the deal had the effect of turning toxic bank debt into sovereign debt, but toxic bank debt had already been turned into sovereign debt through the disastrous bank guarantee of September 2008. I well recall that all-night sitting, as do others who were in the House then. Sinn Féin voted for the bank guarantee whereas the Labour Party and certain Independents opposed it. The guarantee lumbered us with Anglo Irish Bank's debts, using this cumbersome and expensive promissory notes arrangement to do so. Under that arrangement, we would repay from public money Anglo Irish Bank's debts to the tune of €3.1 billion every March, borrowed over ten years.

It does not take a genius to work out the details of the new deal. The Minister for Finance, Deputy Michael Noonan, gave a practical example of his own mortgage arrangement. The new deal allows us to get better terms over a longer period for the same debt. It does not amount to a write-down, but that was not possible, as we know. Indeed, the Greek Government had sought a write-down from a much worse financial position and was told that it was impossible. This deal is as close as we are going to get to one.

Senator Aideen Hayden made a point. I understand why there is an amount of negativity about the deal, particularly on the part of Sinn Féin and others. There is a justifiable anger among the public at their forced shouldering of the massive debt burden. However, the new deal is the best way to ensure that the debt is manageable over a longer period. Arranging cheaper financing over a longer period and transforming 40% of legacy debt into long-term debt have significantly reduced the cost of financing the debt to the State and its people.

For households, last week's deal means that the gap between revenue and expenditure will be reduced by €1 billion every year. We will need to borrow less in the coming years than would otherwise have been the case. This will have a real impact and will be felt by people in coming budgets. This must be welcomed.

Any fair-minded and impartial observer must acknowledge the fact that the arrangement's real value lies in the considerable reduction in what the people will pay. Like many in the Chamber, I have small children and do not want to see them shouldered with an unmanageable debt. The deal's effect will be to make the debt infinitely more manageable over a much longer period. I commend the Government for its negotiation.