Debt deal delivers significant boost to Ireland’s economic future

The deal agreed between the Government and the European Central Bank to ease the debt burden on the Irish people from the Anglo promissory notes has delivered a significant boost to Ireland’s economic future.

The deal agreed between the Government and the ECB is a hugely significant step forward in our economic recovery. Thanks to the savings delivered as part of the deal, the budgetary adjustment needed for next year will be €1 billion less. Furthermore, we will have to borrow €20 billion less on the international markets over the next decade as a result of this deal. This will have a major impact on our long term economic sustainability and our prospects for growth and job creation.

There are a number of important elements of this deal, which will help economic growth and recovery. The promissory notes are being replaced with a long-term bond; essentially what was a high cost, short-term loan is being exchanged for long-term, cheap, interest only loans. We are stretching the period to repay the loans over 40 years, and the first principal payment won’t be made until 2038. The last payment will be made in 2053.

“The interest rate on the new bonds is also crucial; the average interest rate will be just over three per cent, compared with a punitive rate of well over eight per cent on the promissory notes. This interest rate cut will have an impact on Irish taxpayers in the short term; it means we will have to make budgetary adjustments for next year and the year after that are €1 billion less than previously set out. That’s €1 billion less in taxes and cuts.

This deal is one essential element of the Government’s plan to improve the disastrous bail-out deal we inherited from the previous Government. This development is a vast improvement. The Irish economy now has a much better shot at success. The burden of the promissory notes, which had been strangling the Irish public, is gone forever. Now, we will push ahead with renegotiating other elements of the bank debt burden, including breaking the link between banking and sovereign debt.

I would like to pay tribute to the efforts of the Taoiseach and the Minister for Finance, as well as the entire Government, who have worked tirelessly to reach this point. This deal does not solve all of our problems, but it greatly improves our chances. It will give the Irish people, and the international community, confidence in our ability to continue on the path to economic recovery.