What are the promissory notes?
These are notes the government provided to the Irish Bank Resolution Corporation (IBRC). This is the new name for the body created by merging Anglo and Irish Nationwide. The notes are legal contracts that promise the government will make a series of payments to IBRC over the next 20 years.
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How much money will we have to pay?
Over the next decade, the state will pay €3.06 billion per year. This is about €670 per man, woman and child in the Republic of Ireland.
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How much interest is charged?
The average interest rate paid by the government to the IBRC is about 8 per cent.
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Why does the IBRC need the money?
The IBRC uses the money to pay off its debts. When Anglo and Irish Nationwide got into trouble during 2009 and 2010, they paid off bondholders and depositors who were owed money back. To do this, they borrowed large amounts of money from the Central Bank of Ireland. They are using the annual promissory note payments to repay these debts to the Central Bank of Ireland.
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What happens to the money when we pay it each year?
The Central Bank of Ireland was able to create new money to provide to IBRC in a plan that was approved by the European Central Bank. However, the ECB wants to reverse the increase in supply of euros caused by the loans given to the IBRC. So when IBRC pays down the principal on its loan from the Central Bank of Ireland, the money that had been created goes out of existence. While some have said the IBRC paying the Central Bank is “paying money to ourselves” the wider picture is that this operation sees the Irish government giving money to IBRC to give to the Central Bank which, effectively, burns it.
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Would a reduction in the interest rate be significant for the Irish public?
No. The interest on the notes goes from the government to the IBRC. In turn, the IBRC pays interest on its loans to the Central Bank of Ireland. Unlike the principal payments, which are effectively burned by the Central Bank, the interest payments from the government to the IBRC and then to the Central Bank are effectively “payments to ourselves.” Indeed, the Central Bank of Ireland returned a large profit to the government last year, passing back much of the interest it received from IBRC. The bottom line is that changing the interest rate on the promissory notes would not make much difference to the Irish public.
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Could we pay the money off at a euro a year for the next 30 billion years?
The ECB insists that IBRC must repay the Central Bank of Ireland and that the Central Bank must then take this money out of circulation, i.e. burn it. This is because the legal treaty for the European Union forbids “monetary financing” by central banks of euro member states and writing off loans to governments would constitute monetary financing. However, the European Treaty is not precise about what is, and what is not, monetary financing. Paying the money back very slowly over time is likely to be legal as it means the central bank is being repaid in the end.
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Did the government make a promissory note payment in 2012?
In 2012, the government changed the usual procedures for repaying the promissory notes. The actual set of transactions that took place was complex. The IBRC repaid the Central Bank €3 billion. Instead of making a promissory note payment to IBRC to fund this repayment, the government borrowed €3 billion from Bank of Ireland. The government is due to pay that loan back to Bank of Ireland in 2013. The ultimate burden on the Irish people stems from the IBRC’s arrangement to repay its debts to the Central Bank of Ireland and the fact that these repayments are effectively burned. A repayment of this sort was made in 2012 and is scheduled to be made again in 2013. Borrowing the funds for these repayments over a short horizon from Bank of Ireland does not represent a reduction in the burden of the promissory notes on the Irish people .
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€3.1B Prommissory Note
As citizens of Ireland, we believe that the payment of €3.1 billion a year, every year until 2023, for Anglo Irish Bank and Irish Nationwide is reckless, immoral and unjust. These “promissory notes” have imposed the debts of now-defunct private institutions on Irish citizens as a whole. These are debts which we cannot, should not and will not pay.
We therefore instruct our Government:
(a) to declare by March 17th 2013 that it will not make the payment of €3.1 billion on March 31st and to inform the European Central Bank that it will no longer co-operate with this unjust imposition of debts on the Irish people.
(b) not to enter into any arrangement with the European Central Bank that involves any acceptance of a duty to pay these debts and/or any substantial payment of Irish public money on foot of the promissory notes.
We further declare that unless the Government makes this declaration by March 17th 2013, we will engage in peaceful and dignified mass protest in a form to be decided by ourselves collectively.
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