FRANKFURT'S WAY - The somewhat Delphic acknowledgment by the European Central Bank's Mario Draghi yesterday of the promissory note deal with the Government marks an important landmark in the country's rocky road to recovery, writes the Irish Times in an editorial today. For taxpayers it represents the prospect of a real, welcome easing of financial pressures as the Government gains more fiscal room for manoeuvre. For the Government, the prospect of an orderly return to the bond markets this year at sustainable rates, and, no doubt, a political dividend from having brokered a deal that leans to the upper end of expectations. For the economy, the prospect of an earlier return to growth. It's no "silver bullet", but the transformation of promissory notes into long-term bonds should cut Irelands borrowing needs by some €20 billion over a decade. A combination of interest-only payments at 3% and a redemption maturity of up to 40 years for some bonds will make the bailout of Anglo from its €25 billion hole if not painless, at least significantly more sustainable. And the dreaded debt default has been avoided. But, to put the deal in context, it's worth recalling that at the end of 2012 the State's non-promissory note debt stood at €160 billion. We are far from being out of the tunnel, not least, as Taoiseach Enda Kenny reminded TDs yesterday, because of the continuing, "large and unsustainable" gap between government revenues and spending. As a percentage of gross domestic product, the deficit is expected to narrow, but only to a collossal 7.5% in 2013. The pain will continue. That can be reduced to 4.5% in 2014, but only if Ireland sticks to its austerity programme.
DEAL OFFERS CHANCE - LET'S TRY TO TAKE IT - A short-term high interest overdraft has been transferred into a longer-term and cheaper interest loan. That in simple and brief terms is the outcome of the new arrangement between the Government and the Euorpean Central Bank on dealing with the horrific legacy of more than €30 billion in Anglo Irish Bank debt, says the Irish Indepenent in its editorial piece. The newspaper says that it is true that this debt remains with us, it is equally true that the moral and legal basis for it falling upon Irish taxpayers remains questionable. But the stark reality is that we have few if any other practical remedies in our current situation. Harking back to old grievances will not help advance efforts to return to prosperity. Those to choose to rail against our EU partners place far less emphasis upon the day to day support we get from those same partners and without which we could not function. Those who insist that Ireland get concessions comparable to those afforded to Greece do not often add that we not want the huge level of problems which led to Greece getting such concessions. A significant bank debt write-off for Ireland would have been welcomed. But in reality it was never going to happen. This deal gives the Government an opportunity to manage and ultimately deal with the Anglo bank debt. It brings a psychological dividend in that it can banish the last vestiges of a renamed Anglo Irish Bank - surely the most infamous bank in Ireland's financial history.
DEBT DEAL - MODERATE OPTIMISM IS JUSTIFIED - When Enda Kenny told the Dáil yesterday afternoon that the Government had agreed a deal with the European Central Bank on the Anglo Irish Bank promissory notes, the Taoiseach ended what seemed like a particularly frenetic few days of political and diplomatic activity. The Irish Examiner's editorial says that initial assessments suggest that the deal is a good one and that it may help turn an almost impossible challenge into one that can eventually be surmounted. Inevitably, after so many hours of yes-we-do, no-we-don't confusion, the announcement was greeted with considerable relief. Another false dawn, especially after the overnight Oireachtas sitting to finally put Anglo Irish Bank out of its misery, would have been almost too much to bear. It must be a considerable relief too for those who had staked their political reputation on securing a deal. Consequently, it would be more than churlish not to acknowledge the scale of the achievement or not to recognise that the Coalition has delivered on one of the most important promises it made when it came to office. It is necessary though to add the caveat that this welcome is based on the earliest, most positive readings of the deal. On a grander scale, Mr Kenny, his cabinet, and, as he especially acknowledged, Finance Minister Michael Noonan and his staff, have concluded a deal that became essential almost as soon as the ink was dry on the unprecedented bank guarantee of Sept 2008. Commitments made then, for whatever reason and possibly under duress, were utterly unsustainable and would have undone generations of social, material and individual progress in this country. Though that slate has not been wiped as clean as we might wish, yesterday's announcement has, at first reading, thrown a lifeline to a society and an economy stifling under an impossible burden.
ANGLO IRISH: BURYING THE UNDEAD - There is something appropriate about burying the undead under cover of darkness. The Irish government rushed legislation through the Dáil in the small hours of Thursday to liquidate Anglo Irish Bank and Irish Nationwide, the banks that triggered the nation's financial collapse. The aim is to replace €28 billion of expensive promissory notes issued by the state when the banks imploded with long-term bonds, spreading maturities and interest payments over a much longer time. There is an element of brinkmanship about the deal but there is no harm in that if it enables Ireland to finally emerge from under the cadavers of its failed banks, writes the Financial Times' Lex columnist. The last time Ireland tried to solve a banking problem in the middle of the night, trouble ensued. This time might be different. The promissory notes have become politically toxic as well as financially crippling. Moreover, the annual €3 billion payment is equivalent to the scale of austerity measures that Ireland must meet annually under the terms of its bailout. A straight comparison is, of course, far too simplistic, but that's politics. With a payment due by March 31, the government may have decided that it was now or never. New 25- to 40-year bonds carry an interest rate of about 3%, compared with a rate of 8% on the notes and a tighter repayment schedule. The government says the swap will reduce Ireland's net borrowing over the next decade by €20 billion. If that is true, and a credit rating upgrade ensues, Ireland's path back to the financial markets will be eased, and the eurozone will have concrete evidence that its adjustment policies can be successful.