Ireland was forced to ask for an EU/IMF bailout package in November 2010, worth €85 billion when borrowing costs in the money market became prohibitive. At the heart of the Irish crisis was the bursting of a property bubble and the fallout from incautious loans made to property developers. The Irish government was forced to step in to guarantee the solvency of its banking sector.
The Irish government, which currently holds the presidency of the EU, has been in confidential negotiations with the ECB over means to reduce its debt repayments. The story was reported by Reuters and precipitated an emergency bill in the Irish parliament to liquidate IRBC, the Irish Bank Resolution Corporation, which inherited the bad debts of Anglo Irish, one of the major banks at the heart of the crisis, after it had subsumed the Irish Nationwide Building Society. IRBC was an asset recovery bank and had to pay €3.1 billion in annual loan repayments which fall due next month. The vote, which passed by 113 votes to 36 will allow the bank’s debts to be converted to a long-term bond, thereby easing repayment terms. The move needs to get clearance from the ECB, but it is hoped that this may be granted later today.
If the deal is accepted by the ECB, it potentially frees up the government from a debt which is the equivalent of 2% of the nation’s GDP. IBRC’s debts would be transferred to the Irish “bad bank” NAMA, the National Asset Management Agency. The bond could have a lifetime of 40 years before repayment falls due. It is hoped that most of IBRC’s 800 staff will be taken on by NAMA.
The funds that the move frees up could be used to stimulate the Irish economy and boost jobs; Irish unemployment stands at 14.6%.
Irish Act To Reduce Debt Obligation
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.