Is the Deal on Anglo Debt done and is it the minimum we were expecting?
As the government continues to talk about the likelihood of a debt deal on the Anglo promissory notes, members of the last government suggested that the deal was far more likely than was being suggested.
Yesterday Richard Boyd Barrett was quick to point out that while the government may ‘cobble’ together some form of deal it was the content and effects of the deal that would be in question. All sources seem agreed that what the government will be looking for is an extension of the loan period, most likely over 40 years to ease the repayment schedule. This news will disappoint some who hoped for a write off of debt and others who have argued that a much longer loan period is necessary in order to have a real impact on the economy.
Speaking to me yesterday one Fine Gael backbencher said that he would be ‘highly surprised’ if the government did not secure a deal at this point as he understood that many of the items had already been agreed in principle and it was only a matter of ‘ironing out the details.’
Meanwhile a number of those involved with the last government have confirmed that it is their belief that a deal has already been agreed in principle. One former minister said ‘I believe the deal is done and that it is now only a matter of timing and details over the length of term of the repayment.’ He said that he thought it ‘unlikely’ that the government would have raised the issue of a deal without knowing that it was very much on the table.
However, some controversy arose about how much negotiation was actually involved, with sources from the previous administration suggesting that a deal on the promissory notes at Anglo had always been the understanding and that this was no change from the agreed policy at the outset and therefore no change in negotiation tack. Another former minister said to me that ‘the only real surprise is why this has taken so long, but that is not necessarily the governments fault, what we do know however, is that this deal was always on the table.’
A source very close to the late Brian Lenihan said ‘we came under tremendous pressure to enter into a structured scheme of support’. He went on to say that Jean Claude Trichet had given very solemn assurances that there would be some relief for Ireland down the road because the initial terms had to be so onerous. This is backed up by at least 3 other sources from the cabinet who confirmed that they were led to believe at the time that once they signed up it was with a clear understanding that Ireland ‘would be looked after’ at a later date. They also suggest that the idea of a straightforward extension of the term was the very minimum that would be expected.
Dan Boyle of the Green party shares this view saying that all of the initial efforts were understood to be about ‘buying time’. He says that there was always a belief that ‘meeting the full bill’ was not really possible. However, once the economy showed signs of stabilising and some control had returned that a renegotiation of the debt was going to happen. He too says that he was led to believe that the whole area of ‘unsecured bondholders’ would be looked at as this was something that had been covered at the insistence of the ECB and Ireland was given no choice on. He fears that the government has now ‘oversold’ the proposed debt deal and that a simple loan extension will not meet Ireland’s requirements.
A source very close to Brian Lenihan says that there was a ‘clear expectation’ that something would happen later to reduce the burden on Ireland. All sources were at pains last night to say that they do not wish to get into direct conflict with the government and that at this moment the priority is that the country is put first. However, they argue that they have been disappointed at the governments portrayal of the negotiations as something new; ’They are hyping a deal that is meant to be in some way different to what we were doing, that is not the case’ said one, while another suggested that ‘irrespective of who was in government this is the minimum that had to happen, given the assurances received at the time.’
Former Taoiseach Brian Cowen seemed to hint at this previously in an address he made in Washington where he said ‘The next reform must involve a deal on Anglo Irish Bank promissory notes.’ In this address Cowen argued that the whole idea of promissory notes was founded firstly on the fact that it was too expensive to borrow on the markets but secondly ‘promissory notes are a form of debt that can be restructured at some future date without running the risk of triggering default clauses in other types of government debt. Had we initially recapitalised Anglo using regular government debt, we would have shut the door on any possible deal on debt in the future.’
Pointing to this former cabinet members are saying that Ireland and the EU were taking a very cautious approach and dealing with the crisis ‘as we went’ on both sides. They suggest that the entire structure of the deal has always meant that the issue of the Promissory notes at Anglo would be looked at. On this basis it seems likely that it was never a case of ‘if’ but rather ‘when’ Ireland would get the deal that is now on offer. The restructuring of this debt seems to have been a carrot that the EU held out from the beginning as a promise to Ireland for assisting in avoiding a contagion that they feared at the time. If this is the case then it would appear that a simple loan extension will not be a negotiating victory but merely another minimalist step on the original path agreed. Rather than a genuine result of hard negotiations it could well be a case of Ireland just awaiting the moment the EU was prepared to move.