So what happened on Wednesday?As the turmoil continued, the Irish Banking Resolution Corporation, formerly Anglo Irish Bank and Irish Nationwide Building Society, paid out the full €720 million owed to holders of five-year bonds in the bank.
Wait a minute. Greece is supposedly getting a 50 per cent haircut, and we have to pay the full amount?It appears so. Despite the fact that Anglo is a failed bank, the guarantee of September 2008 that covered both assets and liabilities in the bank obliged the Government to meet all bond repayments. Taoiseach Enda Kenny says he understands "the dismay at the cost and unfairness of this policy and the delay it caused to the State's recovery" but added that defaulting would pose "enormous risks". Minister for Finance Michael Noonan (right) said that repaying bondholders was "the lesser of two evils" and that default would take Ireland "over the edge of the cliff". The Government has been criticised by the Opposition for failing to stand up to the European Central Bank and negotiate a discount on the repayment. This week's payout caused TDs from Sinn Féin and the United Left Alliance to walk out of the Dáil on Wednesday to join about 100 protesters.
Who are the lucky bondholders?That's a good question. The bondholders have not been identified, as the payment went through a third party, but there has been a suggestion that some purchased the bonds only earlier this year, thus securing them at a significant discount. After Wednesday's payout they stood to make a significant profit on the transaction, instead of getting burned. This has caused widespread anger, with Independent TD Shane Ross declaring that the bondholders bought the bonds because they believed the Government would "sting taxpayers" rather than them.
But at least that's the end of Anglo?Well, no, actually. A further €2.6 billion remains to be paid on unsecured debt, with about half of this to be repaid in January next year. There is also the question of the promissory note used to recapitalise Anglo. This could cost the State €47 billion in interest and capital payments, but Noonan is hopeful that the European authorities will agree to restructuring that could reduce the debt by about €10 billion.
Okay, at least the €3.6 billion found down the back of the sofa should helpMuch has been made of the lost €3.6 billion, which will reduce the countrys debt by 2.3 per cent, but it won't offer much relief. The find, which is a worrying indictment of the Department of Finance's bookkeeping skills, won't have any material impact on the public finances.
So it's another red face for Ireland?Almost. While everyone from the Department of Finance to the Central Statistics Office to the Office of the Comptroller and Auditor General might be blushing about their failure to spot the miscalculation, which has been attributed to human error, they can take comfort from knowing that they're not the only ones. Last week Germany had to revise its national debt downwards by 2.6 per cent because a €55 billion accounting error at the state-owned Hypo Real Estate bank. So despite those poor Leaving Cert results, we're not the worst in Europe at maths after all.
