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ECB 'takes note' of Irish Republic plan to ease debt burden Taoiseach hails bank debt deal as historic step for Ireland
(35 minutes later)
The Irish Republic is understood to have reached an agreement with the European Central Bank (ECB) to ease the 28bn euro (£24bn) debt burden from the nationalisation of Anglo Irish Bank. The Republic of Ireland has reached agreement with the European Central Bank (ECB) to ease the 28bn euro (£24bn) bank debt burden from the nationalisation of href="http://www.bbc.co.uk/news/uk-northern-ireland-21366164" >Anglo Irish Bank.
ECB president Mario Draghi said: "We took note of an action that is being undertaken by the Irish government." Taoiseach Enda Kenny said it was "an historic step" on Ireland's road to financial recovery.
Irish broadcaster RTE reported that official sources say the words "take note" mean that a deal has been agreed. Ireland has until 2038 to make its first payment. The average interest rate will drop from 8% to just over 3%.
Expensive promissory notes are expected to be turned into long term bonds. ECB president Mario Draghi said it "took note" of the government's action.
The promissory notes had been used to fund the former Anglo Irish Bank. The deal means that promissory notes - effectively an IOU which currently carry interest rates of 8% - are expected to be turned into long-term bonds. The promissory notes had been used to fund the former Anglo Irish Bank.
ReducedReduced
The Irish government has now liquidated the former Anglo Irish bank to pave the way for restructuring the bank bailout. The Anglo Irish was nationalised in 2009, having suffered the largest loss in Irish corporate history. It was merged with the equally toxic Irish Nationwide Building Society and was renamed the Irish Bank Resolution Corporation (IBRC) which was basically a glorified debt collector.
Emergency legislation passed both houses of the Irish parliament. The Irish government has now liquidated the IBRC to pave the way for restructuring the bank bailout.
Under the plan the bank, now the IBRC, ceases to exist. Its debt changes into a long-term bond (form of loan).Under the plan the bank, now the IBRC, ceases to exist. Its debt changes into a long-term bond (form of loan).
Irish president, Michael D Higgins, was recalled from an official visit to Italy to sign the legislation. He flew back to Rome on Thursday. Emergency legislation passed both houses of the Irish parliament on Wednesday night. Irish president, Michael D Higgins, was recalled from an official visit to Italy to sign the legislation.
The scheme is designed to ensure the repayments are reduced and spread over a longer period.The scheme is designed to ensure the repayments are reduced and spread over a longer period.
Speaking on RTE's Morning Ireland, former IMF deputy director Donal Donovan said it would reduce the amount the government had to find every year to pay back the the debt. Speaking on RTE's Morning Ireland, former IMF deputy director Donal Donovan said it would reduce the amount the government had to find every year to pay back the debt.
"By reducing the 3.1bn euro principal repayment, pushing it out, we are doing two things: first of all we're reducing the amount the government has to find every year to borrow from the markets in order to come up with this 3.1bn euro - it's not going to be zero, but it'll be likely to be much less," Mr Donovan said. "By reducing the 3.1bn euro (£2.6m) principal repayment, pushing it out, we are doing two things: first of all we're reducing the amount the government has to find every year to borrow from the markets in order to come up with this 3.1bn euro - it's not going to be zero, but it'll be likely to be much less," Mr Donovan said.
"Second, by pushing it out, we are giving the opportunity for the country to grow and for recovery to take place, so that when we do start to repay this down the road, the cost is not going to be so great. That's not a trivial thing.""Second, by pushing it out, we are giving the opportunity for the country to grow and for recovery to take place, so that when we do start to repay this down the road, the cost is not going to be so great. That's not a trivial thing."
'Lack of detail''Lack of detail'
The debt had been costing Irish taxpayers 3.1bn euros each year.The debt had been costing Irish taxpayers 3.1bn euros each year.
The legislation went through parliament after details of negotiations between the Irish government and the ECB were leaked on Wednesday.The legislation went through parliament after details of negotiations between the Irish government and the ECB were leaked on Wednesday.
In a sitting running into the early hours of Thursday, politicians in the lower house of the Irish parliament voted through the legislation by 113 to 36. In a session running into the early hours of Thursday, politicians in the lower house of the Irish parliament voted through the legislation by 113 to 36.
Liquidation may enable Dublin to delay by several years the repayment of debts it took on to rescue Anglo Irish.
The vote came after a stormy session in which the plans were attacked for their swift timeframe and lack of detail.The vote came after a stormy session in which the plans were attacked for their swift timeframe and lack of detail.
The leader of the Socialist Party, Joe Higgins, said the introduction had been "chaotic".The leader of the Socialist Party, Joe Higgins, said the introduction had been "chaotic".
The Republic of Ireland's central bank governor, Patrick Honohan, had been negotiating the plan with the European Central Bank (ECB) late on Wednesday.The Republic of Ireland's central bank governor, Patrick Honohan, had been negotiating the plan with the European Central Bank (ECB) late on Wednesday.
Irish Prime Minister Enda Kenny said the disappearance of Anglo Irish Bank and the Irish Nationwide Building Society, which is also held by IBRC, from the Irish financial landscape was "long overdue" and that without banking costs, Ireland's debt levels would now be below Germany's.
IBRC's board was dismissed on Wednesday and the accountants KPMG are now running the bank.IBRC's board was dismissed on Wednesday and the accountants KPMG are now running the bank.
IBRC's loans are to be transferred to the National Asset Management Agency (Nama), the Irish "bad bank" responsible for recovering the value of problematic loans made by other Irish banks.IBRC's loans are to be transferred to the National Asset Management Agency (Nama), the Irish "bad bank" responsible for recovering the value of problematic loans made by other Irish banks.
The bank was among the most prolific of lenders to property speculators and developers during the Irish Republic's housing bubble in the last decade.The bank was among the most prolific of lenders to property speculators and developers during the Irish Republic's housing bubble in the last decade.