LIMERICK-born economist, Tom McDonnell, believes that recent moves to negotiate a deal on the Anglo Irish and Irish Nationwide promissory notes, is a positive move.
Mr McDonnell was speaking at Mary Immaculate College. He did, however, warn that the structure of the deal and in particular the interest rate, would be crucial to Ireland’s debt sustainability
“As it stands, the promissory notes will cost €47 billion over the next 20 years.
“It is welcome that the Government is now prioritising this issue and realises that the current structure of Ireland’s debt burden and the promissory note payments has to be renegotiated with a view to easing the burden on the Irish state and ensuring Ireland’s debt sustainability into the medium term.
“However, the structure of any deal is crucial. We don’t yet know exactly what will come about and in particular there is no information regarding what the interest rate on payments might be.”
Mr McDonnell was speaking before addressing a public meeting on promissory note that was hosted by the Limerick One World Society.
“The promissory notes constitute our remaining €30.6 billion bill for the private debts of Anglo and the INBS – a bill due to be paid by the Irish people through higher taxes and lower public spending: he pointed out.
“While most of the Anglo/INBS bondholders have now been repaid, we will be footing the bill for that repayment for years in terms of lower public spending and higher taxes – taxes which will be used to pay for bank debt rather than for improved public services or infrastructure.
He said that over 2% of GDP will be sucked out of the economy each year up to 2023 to meet the promissory note repayments, which will mean more job losses and more pressure on a battered economy and society.
“TASC (an independent, progressive think-tank dedicated to promoting equality, democracy and sustainability in Ireland through evidence-based policy recommendations), has suggested that the Government seek to convert the promissory notes into a low-interest long-term government bond – sometimes called a ‘bullet bond,” which is repayable over a longer period, such as 50 or even 100 years and has long argued that at least some of the former Anglo’s private banking debt that was socialised should be written-down.”
He concluded that the outcome of the negotiations being conducted by the Department of Finance and the ECB will have a long-term impact on Ireland’s debt sustainability and economic recovery.
