RICHARD DOWNES: Tell us about your meeting with the Treasury Secretary.
MICHAEL NOONAN: It was a very good meeting from my point of view. One of my objectives in coming here was to explain that Ireland was beginning to grow again as an economy after three years of decline, and that we are now running a balance of payments surplus, that our exports are driving ahead and that people are going back to work on the export side of the economy.
And I wanted to stress that Ireland's economy was totally different from that of the other programme countries, Portugal and Greece, because Greece is in the limelight with the events in Europe at present. I wanted to draw a very sharp contrast between the Irish economy and the Greek economy, because once you leave Ireland, people tend to put Portugal, Greece and Ireland together. They are totally different. There's an awareness of that, a very strong awareness of it among the financial people I've met in Washington, and among the political people I've met here in Washington. So there is that awareness. The message has to get out to the general public as well.
RD: Do you feel you have an ally and a friend in Tim Geithner?
MN: Geithner is very helpful. We seem to share the same view of what's happening in the euro zone at present. He said of course that not being a participant, his influence was limited but the Americans make the light, and the Americans have a lot of influence everywhere. It's good to have such a strong ally. We left each other on the basis that I could ring him any time on his personal telephone numbers. That's worked fine for us as well, to have an outside perspective if events went dramatically wrong some time in Europe and we needed an outside perspective, well I have someone who's going to give it to me now.
RD: You have a specific request of him in relation to the interest we are paying on the European portion of our bailout?
MN: I was describing to him that we were meeting all targets in our bailout programme and that things were going quite well and it was our intention to meet all conditions and to grow the economy again. But I also said to him that the price we were paying for money from the various funds in Europe was excessive and that a price reduction would be of great assistance to Ireland. I wasn't specifically focusing on the argument with the French and German governments, but as a matter of overall pricing, the EFSF fund and the other fund in Europe are getting money on the bond market at less than 3% and they're charging us almost 6%. If you were receiving a pension fund, you wouldn't be expected to pay a 300 basis point handling charge or commissions on money like that.
They have reasons of moral hazard for doing it, but I pointed out to him and to others during my trip that in a democracy the moral hazard is at the ballot box. When you think of Fianna Fail dropping from 42% to 15% from one election to the other, that's sufficient moral hazard to keep any government on their toes, and you don't need a financial penalty on top of that. So he took that point very strongly.
RD: And you asked him to lobby on Ireland's behalf?
MN: Yes. I said that in general terms one of the problems with the programme is that it's too expensive. I put the hypothetical question to him. I said, "What level of growth do you think a country should have that it should be able to pay 6% for money going forward when there is so much debt being accrued on the bailout package?" He took that point. He demurred as well and said he was of limited influence on these things. But certainly there was a commitment that he and his officials will be expressing the view that for the three programme countries, the price of the programme was too high.
RD: His influence was discussed quite widely after an article saying that he intervened. We'll put that aside, because we don't know that he intervened. We haven't got the evidence. But why are we continuing to pay the Anglo and Nationwide Building Society senior, unsecured, unguaranteed bonds? You obviously have a plan for that. Tell us about that.
MN: I raised that specifically with the IMF people. AJ Chopra, who'll be well known in Dublin, was at the meeting with John Lipsky, who's the acting head of the IMF. I put my cards face up on the table, saying, 'Look, it's no longer a bank. Anglo is now merged with Irish Nationwide. It's a warehouse for impaired assets. Its deposit base has been moved out into the pillar banks. And it doesn't work as a bank anymore. You can't put your money on deposit in Anglo Irish. You can't get a loan from Anglo Irish. So the only thing that gives it the name of a bank is because it has a banking license. It needs the banking license to access the monies from the Central Bank. So I said that as far as I am concerned, this is not a real bank. This is a warehouse, and we need your assistance in dealing with the senior bond holders because we don't think the Irish taxpayer should have to redeem what has become speculative investment. I don't think it should be redeemed (unintelligible). We have it raised as a very strong issue at the very highest level. But not with Mr Geithner. That's not his issue. This was with the IMF.
RD: Did you get agreement from the IMF on that?
MN: I got an agreement that they understood our position fully and that they would work with us to seek to resolve it. Our difficulty on this on previous occasions was never with the IMF. The difficulty is what attitude the European Central Bank may take. It's hard to predict that because there's a changing of the guard there. Mr Trichet is at the end of his term in October. And Mr Draghi, the present governor of the Italian Central Bank, will be taking over from him.
RD: How much are you looking for of a cut on those bonds? We're talking about €3.147 billion for Anglo and about €600m for Nationwide?
MN: Yes. In or around that kind of money. You can't give your negotiating position away over the airwaves, but in the secondary market, there's quite a large discount. And the secondary market is usually the market deciding what the appropriate price is. That's a guideline for any negotiations. But we're a long way from negotiations yet.
RD: Yet you paid 100% on €200m in unsecured, unguaranteed, senior bondholders in Anglo last week?
MN: The difficulty of that last week was all eyes were on Greece. And the debate was whether Greece would restructure or reschedule or reprofile or default. And certainly when all that attention was on that particular range of issues, I certainly didn't want the attention to switch to Ireland for a relatively small amount of money in the overall context of things. And someone to say, 'There's a credit event in Ireland about Anglo-Irish bank.' That was the reason that we said 'Look, it's a relatively small amount and we'll fight the battle in the autumn, rather than attract too much attention to ourselves now in the very context of credit events being discussed.'
RD: So you're going to be looking for cuts of at least 2/3, aren't you? That would be a reasonable amount from these people?
MN: I'm not prepared to take up a position at present.
RD: But it will be substantial?
MN: Well I would hope so. We'll see how it plays. There are other participants. We will have allies in the debate and we will have people who will see it differently. So we'll see how it plays out.
RD: You're here in part to unwind Anglo and to have discussions regarding $10-11 billion in assets here. There former chief executive is here in the bankruptcy courts. Have you managed to get anywhere with those loans and what's your view on Mr Drumm's position?
MN: The first thing that people should realise is the Anglo assets are not in NAMA. People have a view that everything is in NAMA, but Anglo assets overseas are not in NAMA. And there are assets on the east coast of the US, with some assets elsewhere in the US, that total somewhere between $10 and $11 billion. Not euros. It's dollar amounts we are talking about. Since we have reorganised the department of finance and brought responsibility for banking policy in-house in the department, we have taken a decision that the Anglo assets in the US should be sold. Seemingly there's a lot of liquidity in the market here because of the policies followed by President Obama. We think we'll get as good a price now as we'll ever get for them. So there are consultants retained to advise. That's proceeding. We'll have a better idea where that's going in the next 48 hours or so. But not in terms of having a decision on savings or anything like that. But we'll have more precise advice on how to proceed. The general objective at present is that by Christmas the Anglo book in the US would have been sorted.
RD: And their former chief executive who's here?
MN: Well he's in the American legal system, so it's not for me to comment on that while there are still proceedings under US bankruptcy law in the US.
RD: You've got a hectic round coming up this weekend with the Greece crisis. Can you talk us through Ireland's position on this? Obviously, the credit event is what people are talking about, fear that a credit event could cause contagion and trouble. What's Ireland's take on this?
MN: The position is that Ireland would have a limited enough influence, because it tends to be the larger countries, and particularly the triple A (rated) countries who are the people who underpin the financing of the European Union, who will be the real decision makers. But as good Europeans we want a programme that works for Greece. And we don't wish them any ill luck of any sort. We hope an arrangement can be made that will allow Greece to continue as a good economy, working their way back to prosperity. So that there aren't difficulties either socially or economically for Greece. Within that context we also have a very strong self-interest. We know that events could take a bad turn in Greece. And there would be an adverse, knock-on effect in Ireland. So my primary concern over the weekend, and when we go to Luxembourg on Sunday for a meeting which will start on Sunday until Monday, is to make sure that if decisions are made about Greece there are complimentary decisions make about Ireland and Portugal, and to firewall us against any adverse effects.
RD: By which you mean what exactly?
MN: I don't know how it will play out in terms of Greece, but there are obviously, back to your original question, there are many people that see Greece, Ireland and Portugal in the one box. And despite our best efforts to separate them and to explain that Ireland is a different economy, what applies in Greece in some people's minds should also apply in Ireland. And there's risk in that for Ireland, just at a time when we're meeting all deadlines and our economy after three years of decline is growing again, when people are beginning to go back to work in parts of the economy - when our tourist industry is beginning to take off again - it looks like a good tourist year -- we want to make sure that shocks from elsewhere don't knock us off course. Because really what we want now is pretty well to be left alone and to get on with the job that we were elected to do and grow the economy back to prosperity.
