Most national debt not repaid, says Noonan

MOST NATIONAL debt was not repaid, Minister for Finance Michael Noonan told the Dáil. Rather it was serviced by paying the interest on it and then it was rolled over.

“As a factor of GDP, it reduces dramatically as the years go by in a growing economy with some inflation.”

Mr Noonan said the Government was committed to reviewing the arrangements put in place to capitalise Irish Bank Resolution Corporation (IBRC), formerly Anglo Irish Bank, and Irish Nationwide Building Society. Part of the capitalisation of the IBRC was provided using promissory notes as consideration.

“While the development in regard to the end of March promissory note payment is positive, we must continue to work towards the greater benefits that would derive from the re-engineering of the notes.”

Mr Noonan said the Government was pursuing the possibility of achieving a full deal on a replacement of the promissory note with a mechanism which would, in general terms, lengthen the period of repayment and reduce the interest rate to make it easier on the taxpayer.

“However, we are not looking for any write-offs or anything like that because it was made clear, when the Greek deal was done, that it was a unique arrangement for that country.”

An analogy, said Mr Noonan, was that if one opted to replace a five-year term involving very onerous payments with a type of mortgage arrangement over 25 years, one would end up paying more but the annual payments would be much less burdensome.

Moreover, by the end of the repayment term, growth and inflation would have eliminated much of the burden of the debt.

United Left Alliance TD Richard Boyd Barrett said it was difficult not to see the entire negotiation, and the debate around it, “as a complex accountancy trick”.

He said that while the Government did not have to borrow the €3.1 billion due last month, the arrangement made would have an effect on the deficit to the tune of some €90 million. The €3.1 billion was “simply being kicked down the road” and there would be no let-up in austerity.

Mr Noonan said it was true that an extra €90 million would have to be paid as a result of the arrangement, which must come out of the 2012 figures, but there was no need to make any adjustments because the Government could cover the amount, as it saw it at present, within the figures in the budget. “As such, there is no question of any additional expenditure cuts.”

Mr Noonan said there was always slight movement on figures within the context of a budget which comprised €36 billion in tax plus a significant borrowing requirement after that.