IRELAND clinched an historic deal yesterday to ease pressure on its debt mountain and defer the legacy costs of bailing out failed Anglo Irish Bank and Irish Nationwide.
The deal, which won the backing of the European Central Bank yesterday after 18 fraught months of negotiations, will stretch out the cost of paying back the bailout to about 40 years instead of ten, cutting the state’s borrowing costs by €20bn (£17bn) over the next decade.
The deal sent borrowing costs down below pre-2007 levels last night, with 10-year yields plummeting to 3.955 per cent.
“[This] outcome is an historic step on the road to economic recovery. It secures the future financial position of the state,” Prime Minister Enda Kenny said.
The terms of the agreement, which involved the formal liquidation of the banks yesterday, will see short term emergency notes issued in 2009 to keep the banks afloat converted into longer dated sovereign debt, which is cheaper to finance.
Converting the notes will give more scope to post collateral to the ECB. The ECB does not accept the notes as collateral, but does accept sovereign bonds, allowing the banks to borrow cash.