In an interview with Dow Jones Newswires, a senior Irish official said there was “cautious optimism” that a complex deal to free the government from paying the next, EUR3.1 billion installment on the promissory notes will be struck by the end of this month.
The promissory notes were pledged to Anglo Irish Bank Corp., and Irish Nationwide Building Society–now jointly renamed the Irish Bank Resolution Corp–over three years ago. Based on those pledges, both banks qualified for emergency loans from the Central Bank of Ireland.
Rescheduling the notes would lengthen the time over which the central bank is repaid, and therefore needs the approval of the European Central Bank. Since last September, the Irish government has been talking to its bailout lenders–the European Union, the International Monetary Fund and the ECB–on ways to delay or reschedule repayment of the notes.
“The technical discussions are well advanced,” the official said. “But there still needs to be a decision at the principal level [among the bailout lenders] whether this thing is going to work or not. Between now and the end of the month, when the next promissory note payment is due, will bring that to a head.”
Rescheduling payments on the notes would improve the government’s prospects of returning to the bond markets in 2013, when its EUR67.5 billion loan agreement with the EU and IMF ends.
But the senior official revealed that the government is seeking a wider deal to reduce the burden it incurred in bailing out its banks and ensuring they didn’t default on their debts, which could have toppled the already fragile European banking system.