Ireland hails historic debt deal with ECB

ECB NOD

The new deal was designed so that the ECB did not have to vote on it, enabling ECB President Mario Draghi to say simply that the Governing Council had simply "taken note" of Dublin's plan.    

The yield on Irish benchmark 2020 bonds fell as low as 3.955 percent, the lowest seen in an equivalent Irish benchmark bond since early 2007, before the subprime crisis started, according to Reuters data.

The government said it had cut its forecast for next year's budget deficit as a proportion of GDP to 4.5 percent from 5.1 percent previously and to 2.4 percent from 2.9 percent previously for 2015, below a target of three percent.

"It is positive for funding, and therefore increases Ireland's chances of leaving its (EU-IMF) loan programme and relying more heavily on the capital markets for funding toward the end of this year," said Fergus McCormick, head of sovereign ratings at DBRS ratings agency.

"However, the swap itself will not affect our A (low) rating or negative trend on Ireland, because swapping the promissory notes for a bond does not reduce the stock of public debt."

FUTURE BURDEN

Under the terms of the deal, first reported by Reuters on Wednesday, Anglo's promissory notes, with an average maturity of between seven and eight years, will be exchanged for government bonds with an average maturity of over 34 years. The first principal repayment will be made in 2038 and the last in 2053.

The finance spokesman for the opposition Sinn Fein party said the agreement would burden future generations.

"This week my youngest son began to crawl. He wasn't even born at the time the promissory note was issued, yet he'll be 40 years of age and this state will be paying back the toxic debts of Anglo Irish Bank," Pearse Doherty told parliament.

Anglo Irish's near-collapse in 2008 pressured the government into guaranteeing the entire financial sector, sucking it into a downward spiral and in late 2010, a 67.5-billion euro loan from the EU and IMF.

Kenny rushed through emergency laws to liquidate Anglo Irish in the early hours of Thursday morning, the first part of a plan

to avoid having to keep paying 3.1 billion euros annually on the Anglo Irish promissory notes.

That annual payment was equivalent to more than 670 euros ($900) for every single person in the country.

Irish people, fed up with years of tax increases and spending cuts, did not expect much of a lift.

"It's a positive thing, definitely, but it won't mean much to the ordinary Irishman," said Turlough O'Brien, a gravedigger from north Dublin.

"There are still more austerity budgets to come and people will be hit with more taxes, like property tax and water charges."

"We're going to have to get used for paying for the government's mistakes. It's still very much austerity and we have to carry the can."