THE EMPEROR HAS NEW CLOTHES

PROMISSORY NOTES TO PROM NOTE BONDS EXPLAINED

Heaven help me, but I'm going to try to explain the deal done by Ireland’s Finance Minister Michael Noonan last February when he transposed the contentious Promissory Notes to Sovereign bonds.

THE ORIGIN

In 2010 Anglo Irish Bank and Irish Nationwide weren't just in serious trouble, they were bust, dead in the water. Between them they had liabilities of €30.6bn (Anglo with over €25bn of that), didn't have the assets to cover those liabilities, leaving their various investors seriously exposed to a major hit. 

At this stage both the European Commission and the ECB were involved, were fully informed of the crisis. 

The ECB controls the printing of euro in the various Eurozone countries. No country can just willy-nilly print additional currency; before an individual bank can get a cent, never mind billions, it must produce evidence of solid assets to back up its request. When they went to the Central Bank of Ireland in 2010 neither Anglo nor Irish Nationwide had any such solid evidence; in fact they were zombie banks, insolvent in practice (they could - still can - actually legally hide this, too complex to explain here!) and under its own rules and regulations the ECB should have refused permission for the Irish Central Bank to print that money.

Fearing for the euro, fearing for the survival of bigger banks in the so-called core countries which at the time were hugely exposed to banks in the so-called peripherary, the ECB accepted as collateral the infamous Promissory Notes, signed by Ireland's then Minister for Finance, Brian Lenihan. It should not have done so but because there were no structures in place for bailing out a bank (there are now), they accepted those notes. And so it began.

The ECB allowed the Irish Central Bank print those extra €30.6bn, which went to Anglo and Irish Nationwide, bailed out their investors. 

The ECB then called in those notes, however, insisted that year by year over the next decade and more the Irish government - the Irish people - would have to take that €30.6bn back out of circulation; we would have to borrow those billions, real money which then became real debt on which we would be paying real interest, and destroy those billions, until the entire €30.6bn had been taken out of circulation.

By January of 2013 most people in Ireland were beginning to grasp the obscenity of this neat little arrangement. Though not a single cent went to the Irish exchequer, not a single hospital bed paid for, not a single classroom, every March 31^st from 2011 to 2023 our government would borrow €3.06bn, it would end up with the Central Bank of Ireland, who would destroy it. All to bail out two zombie banks.

From 2024 to 2031 a reducing amount would be borrowed, would still be burned, until the entire original €30.6bn Promissory Notes plus interest, was paid. All told it came to €47.58bn but the interest went largely to ourselves (table 1 & note 1 below).

AWARENESS DAWNS

As the reality of this absurdity dawned on people there was outrage, rightly so – this was from the Laurel & Hardy School of Economics, surely?

Pressure mounted on the government to simply tear up the remaining €25bn Promissory Notes and face down the Troika, the ECB in particular. But no, Government didn’t have the stomach for that particular fight. Instead they came up with a new arrangement, a ‘deal’ which transforms that very debatable debt (‘Totally illegal’, Finance Minister Michael Noonan admitted on national radio) into sovereign bonds.

THE NEW PROMISSORY NOTE BONDS

Here is what happens now: as a result of Noonan's 'deal' the National Treasury Management Agency (NTMA) issued bonds to the value of €25bn (currently held by Central Bank of Ireland); that money was used to 'buy' the remaining Promissory Notes, which were then destroyed.

In other words, one €25bn debt was simply exchanged for another. The actual Promossory Notes - the paper - was destroyed, the actual debt debt remained, in full.

So what happens with the debt? A new schedule, that's all, a new schedule of borrowing, burning and payment, the burden shifted from this generation to the next, and the generation after that.

Before the end of 2014 the Central Bankwill sell the first of the new P Note bonds, the smallest of the bonds at that, a mere €500,000,000. Immediately it's sold we start paying interest to the new bondholder; in 2038, that bondholder comes a-calling - 'thanks for the interest for the last 24 years, now I'd like my original €500,000,000 back.'

Before the end of 2015, another €500m will be sold, then another and another and another, 2016/17/18, interest being paid immediately they are purchased, the principal to be paid sometime into the 2040s.

It gets worse. In 2019, the first of five annual €1,000,000,000 bonds will be sold, the billions then burned; in 2024 it increases again, eight years now at €2,000,000,000 per year, every cent borrowed and burned.

Finally, in 2032 the last of the P Note bonds is sold, this one for €1,500,000,000, making a not-so-grand total of €25bn, exactly the same as the remaining Promissory Notes (table 2).

DANTE’S INFERNO, NOONAN’S HELL-FIRE

As explained above, exactly the same thing happens to all those billions as was happening before the Noonan 'deal', only at a different pace. Up to March of last year the government was borrowing €3.06bn per year, now the pace has eased as has the pressure on them. But that is all they've done, eased the pressure on themselves and their annual budget. The overall result remains the same; to bail out the failed investors in two bust banks, a broke nation is borrowing billions to burn, all at the behest of the ECB, all also because our own government didn't have the spine to stand up for its own people.

WHAT, ANOTHER SCHEDULE?

Meanwhile, however, on all those borrowed and burned billions we’re paying interest (over €40bn in total) but in 2038, a new schedule kicks in - the bondholders coming a-calling, looking for their original money back. Yes, that money, the billions we destroyed.

REFLECT

Just pause for a second and take that in. Expecting to make huge profits, institutional financiers loaned billions to cowboy Irish bankers in Anglo and in Irish Nationwide. Those investments failed, now we – the Irish people – are landed with this bill, plus interest, a projected total of €72bn (all going well!). Rather than fight this odious debt our Finance Minister converts the questionable Promissory Notes to sovereign bonds, shifting most of the responsibility for paying that private debt on to future generations.

Would you do this to your own kids? To settle disputed debt you were being strong-armed to pay, would you take out a huge loan for your kids and their kids to pay? That’s what Minister Noonan has now done in your name.

INTER-GENERATIONAL DEBT

Inter-generational national debt is normal but there’s nothing ‘normal’ about this. The Promissory Note billions were for the exclusive benefit of banks, bankers and high financiers; the sovereign bonds that now replace them are exactly the same. 

WHAT THEY DON’T WANT YOU TO KNOW

Every government spokesperson on this talks about savings - how do you effect ‘savings’ in paying a debt you never owed? What they’re diverting you from is this – with the Promissory Notes, we were borrowing to burn; with these Sovereign Bonds we are still borrowing to burn, exactly the same amount.

CHOOSE WHO TO BELIEVE

As with so much that he has done since becoming Minister for Finance, Noonan’s new ‘deal’ has been generally acclaimed in our national media. Since this government came to power, however, one little boy, then another and another has been saying – the Emperor has no clothes.

On this deal we’re saying ‘Yes, the Emperor has new clothes – same as the old clothes’. It’s a sham, it’s a scam.

Choose who to believe; choose what you do next.

Ballyhea Says No, Charleville Says No; a growing number of towns and villages around the country have joined us in the Ireland Says No campaign. There is still time for you to join us, but that time is running out. Those bonds are scheduled to begin issuing before the end of 2014; no matter what, that must NOT happen.

Twitter: @ballyhea14; @fb_fitz; @fitzcheese; @cathandpat.

Facebook: Ballyhea bondholder bailout protest.

TABLE 1

THE ORIGINAL PROMISSORY NOTE SCHEDULE

This schedule involved the destruction of billions every March 31^st

                                                    TOTAL FOR PERIOD            RUNNING TOTAL

2010                 €0.2bn                                       €0.20bn                              €0.2bn

2011 - 2023      €3.06bn/annum (13 yrs)         €39.78bn                           €39.98bn

2024                 €2.1bn                                       €2.10bn                           €42.08bn

2025 – 2030     €0.9bn/annum (6 yrs)                €5.40bn                           €47.48bn

2031                 €0.1bn                                        €0.10bn                          €47.58bn

TABLE 2

THE PROMISSORY NOTE BOND ISSUE SCHEDULE

(yet to be approved by the ECB) 

                                                                                               TOTAL

2014 – 2018:        €0.5bn/annum (5 yrs)               €2.5bn

2019 – 2023:        €1.0bn/annum (5 yrs)               €5.0bn

2024 – 2030         €2.0bn/annum (8 yrs)              €16.0bn

2031                     €1.5bn                                     €1.5bn

NOT-SO-GRAND TOTAL:                                     €25bn

TABLE 3

PROMISSORY NOTE BOND REDEMPTION SCHEDULE 

                                                                                               TOTAL

2038                         €2bn                                                  €2bn   

2041                         €2bn                                                  €4bn   

2043                         €2bn                                                  €6bn   

2045                         €3bn                                                  €9bn   

2047                         €3bn                                                  €12bn   

2049                         €3bn                                                  €15bn   

2051                         €5bn                                                  €20bn   

2053                         €5bn                                                  €25bn   

NOT-SO-GRAND TOTAL AGAIN?   €25bn

MEETING WITH THE ECB Dublin, July 16th 2013

PRESENT

Fiona Fitzpatrick, Charleville Says No campaign group

Diarmuid O'Flynn, Ballyhea Says No campaign group

From the ECB: Two officials who wished to remain anonymous.

BLUNDERING START

The meeting got off to a dodgy start, yours truly blundering right into a gaffe of my own unthinking creation, expressing my disappointment that we weren’t meeting more senior officials (Diego Rodriguez, ECB Troika mission chief, had suffered a family bereavement in Spain and wasn’t able to make it back to Dublin in time); the two officials who had actually taken the trouble to meet us took it well but I spent an uncomfortable few moments trying to extricate myself from that one. Turns out anyway they were a lot more senior than we knew.

First off, it should be said that in the near 90 minutes we were with them we did most of the talking, they did most of the listening; that's not a ‘wishful thinking’ statement, it’s fact – they did listen, were both very much tuned in to what we had to say, took copious notes as we went along.

TO START - TWO GREAT LIES DEBUNKED

We began by outlining who we were and where we were coming from. Before we even got to our proposals, however, we said we felt there were two great lies we had to address, two great lies being told across Europe and around the world about Ireland and the Irish people.

THE FIRST GREAT LIE

WE ALL PARTIED, THUS BROUGHT THIS ON OURSELVES.

During the bubble inflationary years (I hated the Celtic Tiger term even then) Ireland was awash with money and yes, too many Irish people did party, did piss and puke their way outside the pubs and clubs of Ireland right through that period.

Too many people went away and bought the big four-wheel-drive fuel-guzzling monsters, that's true too.

Many of us headed for sunnier climes a few times a year, many bought the holiday home in France/Spain/Portugal, many invested in second and even third houses here at home, the retirement nest-egg. 

Many first-time buyers took out mortgages they can’t now afford on homes that were massively over-priced.

We overpaid ourselves also, many of us, in both the public and in the private sector.

But did we all 'party'? No, we did not. Did we all engage in all or even any of the above? No, we did not. Did everyone in Ireland profit during those years? No, absolutely not.

A question though - are we Irish not entitled to drive big cars, not entitled to a holiday home, not entitled to a standard of living enjoyed by many of those who would criticise us? No? That old Irish guilty/inferiority complex is being exploited yet again.

Because here's the thing; even accounting for those who did engage in all or some of the above, did that cause the world-wide banking crisis in which we found ourselves caught up? No, it did not. Did it cause the euro currency crisis in Europe? No, it did not.

We elect people who select people to do certain jobs; if those people don’t do their jobs properly (and patently the Irish Regulator did not), what can the people do about it? What do the people even know about it? If those we elect make false promises, what are we supposed to do when they turn around and renege on those promises?

NOTHING the mass of the people did or didn't do in Ireland during those cursed years caused this crisis. It was the money, the cheap billions flowing in to the cowboy banks after the launch of the euro, that money then swamping this economy. That was the source of Ireland's problem.

THE FEW ROTTEN APPLES

Between the bankers and their developer and political friends, probably not much more than 100 people at the very top were the link-men between Ireland and the foreign banks and financial institutions from which came those billions. From the recently released Anglo tapes we get a flavour of what those guys were like - cowboys, gamblers, wide-boys on one hand, incompetents on the other.

Even after a cursory listen, are those the kind of people who should have been entrusted with the savings of hard-working Germans/French/Dutch etc? But they WERE entrusted with those savings, and here is probably the most relevant question of all - by whom? By those to whom those depositors had entrusted their money, the banks and financial institutions of Germany/France/Netherlands etc.

TO SOLVE A PROBLEM, GO TO THE SOURCE

They were the ones who poured those tens and hundreds of billions into Ireland - why is the finger never pointed at them? Where was their duty of care to their own depositors? Where was their due diligence? What about the party they were having in the early years as the profits flowed back from Ireland?

No sir, the notion that we all partied, that we brought this on ourselves and thus now must pay the price - nonsense.

And speaking of Germany and the idea that this is costing them billions: no country profited like Germany in the first decade of the euro; no country has profited like Germany since the crisis broke. €80bn the national government has saved in its bond dealings; add in what the regional governments have likewise saved, add in also the profits now being generated in German banks and financial institutions as deposits have migrated to there from the affected European countries, throw in the billions their bondholders have shared from the €69.7bn given by the Irish people, plus their chunk of the €60bn likewise given and now likewise being paid for with interest by the people of Greece – against all that additional income, how much has Germany actually given (as opposed to loaned) to Ireland?

THE SECOND GREAT LIE

AUSTERITY IS WORKING, IRELAND IS A SUCCESS

We can see how this impression is being created, the headline numbers being quoted to back up that assertion. But look behind those numbers.

UNEMPLOYMENT FALLING

The world is told that Ireland's unemployment numbers are finally falling, dropped below 14%, corner turned and green shoots.

The truth is that when all the various government schemes are taken into account, when all those who are on welfare but in part-time employment are taken into account, the number soars to over 25%.

EMIGRATION

Never spoken of when the above headline figure is being quoted but were it NOT for emigration, where would Ireland be? People are leaving Ireland at levels not seen since the 1840s, the Great Hunger, when the population almost halved in only a few years. It’s not just young people leaving either, though they are and in droves, a small club in Mayo recently picking a notional starting 15 who have all emigrated. It’s entire families, it’s people in their 50s and even in their 60s, forced out by the circumstances created by these austerity programmes.

SUICIDE

Yet another statistic overlooked when Europe, having been so misinformed by our own officials, talk up how Ireland is doing under the austerity programme. There are so many casualties at the moment but these are the ultimate, a growing number of people who feel trapped, can’t see any other way out and thus act, not because they wish for death but because they can't handle life anymore, not this life anyway.

RETAIL SALES

You want to know how a country is doing, look at the retail sales, look to commercial vehicle sales and see how much confidence business has in the immediate future; in Ireland’s case, little or none. They’re the ones doing the highest and the heaviest mileage, they’re the ones who need to keep their fleets up to date; they’re the ones now hedging their bets.

DIY STORES IN TROUBLE

This week another DIY chain, Homecare, went into Receivership, joining Atlantic Homecare and B&Q; not alone has the construction industry folded, people can’t even afford to maintain what they have.

EXPORT-LED RECOVERY

Another myth. Aside from the fact that as pointed out by the EU itself, many of those exports aren’t actually fully produced here at all, there is a growing trend away from Goods exports to Services exports, the latter far less beneficial to the Irish economy – high-end jobs, many of them filled from outside the country anyway but certainly having very little impact on the local unemployment figures.

DEBT SUSTAINABILITY

The normal formula used when calculating national debt sustainability is GGD/GDP, Gross Government Debt as a percentage of Gross Domestic Product. Given what’s already been pointed out vis-à-vis the skewing of GDP in Ireland by the multinationals, however, the more pertinent formula for us would be GGD/GNP, Gross Government Debt as a percentage of Gross National Product. 

According to this Sunday Business Post article, at the end of 2012 Ireland’s national debt stood at just under €192 billion, equivalent to 118 per cent of gross domestic product (GDP). Apply the debt figure to GNP, however, and we get a truer picture for Ireland – 192/133.4 x 100 = 144%. 

Worse, that’s not even the true national debt figure. With its own remaining bonds of around €25bn, with IBRC and its exposure now in its lap, though NAMA is nominally privately owned (51% in ‘private’ hands) in reality it’s our baby, fathered and mothered, bred and buttered by us. Add in those bonds to the figure above, where does that leave us?

Sustainable? Given that we’re in recession, unlikely to see any real growth for years, that debt figure increasing in bounds? Economist Michael Taft puts it very succinctly – a bloody disaster. Constantin Gurdgiev, an economist from the another side of the field, puts it as colourfully – the light at the end of the tunnel is an oncoming train.

INTRO SUMMARY

The ECB representatives gave us all the time we needed to outline the above, without interruption. It took up a sizable chunk of time, time that was very precious – when we began this campaign we hadn’t expected to have to actually present Ireland’s case for debt writeoff ourselves and here we were spending all these precious minutes in a preamble, having to debunk lies about Ireland, lies being spread by our own government. In the circumstances, however, we felt it was necessary.

THE BALLYHEA PROPOSALS

Having finished the opening statements, we then got to present our proposals for bank-debt write-off for Ireland. There are three items in those proposals but only the first pertains to the ECB, the destruction of the €28.06bn in Promissory Note Bonds currently held by the Central Bank of Ireland.

Those bonds are what’s left of the €30.6bn bailout of two banks in 2010 (Anglo Irish Bank €25.3bn, Irish Nationwide Building Society €5.3bn), at a time when they were known to be already insolvent. The Irish government of the time issued the notes, the ECB gave the okay; the legality of those Promissory Notes is now being tested in the High Court but the even bigger question is their legitimacy, at any moral or ethical level.

Just as with the original Promissory Notes themselves, this is €28.06bn being borrowed to ‘burn’; that’s worth repeating, it’s billions being borrowed only to be destroyed, and by an already massively-indebted economy, every cent of which was for the benefit of zombie banks to pay failed investors, not a cent of which went to the people who are now expected to pay interest on all those destroyed billions and whose kids and grandkids will then have to pay the original €28.06bn. Obscenity piled on obscenity.

We want the ECB to allow the total destruction of these bonds. It was done, it can and must be undone. How? How can this be done within the ECB's own parameters? We don’t have the answer to that; we weren’t consulted when this debt was being imposed on us in the first place - don’t ask us how it can now be lifted.

DISCUSSION STAGE

Up to now the meeting had been almost completely one-sided; at this stage an exchange of views began. 

As is included in the proposals, we stated our position that we believed this crisis goes back to the launch of the euro.

It was a flawed design, stated as such as far back as 1998 in a Financial Times article by renowned Belgian economist Paul de Grauwe, who then created a fictitious scenario that subsequently turned out to be not so fictitious at all. There were major structural flaws in the design, all of which was known even within the EU itself at the time, and still it was launched. That was a grievous error.

However, because we were part of the Eurozone, signed up to all this, we share the blame and thus must share the cost. Sharing is the key word here though; as yet no-one seems to have taken any blame for the flawed design – so be it. But Ireland has been hit disproportionately, massively disproportionately, with the cost.

How massively? Our gross bailout cost (not including either the assets we now hold – a few billion – or the interest paid on the loans, the coupons on all the bonds, the interest lost on the €20bn taken from the National Pension Reserve Fund) is €69.7bn. From the 2011 Census, that amounts to over €15,000 per capita in Ireland. The equivalent for Germany? Over €1.1tn, that’s over €1,100,000,000,000. Would Germany tolerate that? Never. Yet we’re expected not just to accept that burden but even to be grateful to our European partners for their assistance.

ARGUMENTS, COUNTER-ARGUMENTS

As with Mr Honahan in our meeting of the previous day (report here), Ireland’s legal obligations were put to us, the fact the ECB is duty-bound to implement the various Treaty rules; as with Mr Honahan, we asked where the legal protection for the people stood in all this.

The ECB reps spoke of Ireland’s unilateral action in 2008, the infamous Blanket Bank Guarantee, spoke of other Irish government actions taken on their own; they explained also that the ECB didn’t get involved officially until 2010 by which time much of the damage was done. 

We countered with the argument that in circumstances where there were no European-wide structures, no guidelines even, Ireland’s leadership were acting as best they saw fit to protect Ireland’s interests. Misguided actions as it turns out, deliberately misguided as shown in the Anglo tapes but irrelevant; the real fault lay with us as Europeans, all of us, and with that seriously flawed currency launch, the lack of foresight, oversight and structure.

Insurmountable legal barriers, that’s what we’re told we face, and it was pointed out to us that if Ireland unilaterally decided to destroy the Promissory Notes bonds now held by the Central Bank of Ireland, there would be serious repercussions. 

Daniel O’Connell (Catholic Emancipation), Abraham Lincoln (slavery), Nelson Mandela (apartheid) all faced ‘insurmountable legal barriers’, ‘serious repercussions’; we know what happened. Our government has balked at these challenges; Ballyhea, Charleville, Ratoath, Tralee etc – no-one in this campaign will be thus stopped. Debt slavery for us and for several future generations? This is odious debt, we will rid ourselves of it.

ON OUR OWN

We have done a lot of research on all of this, we link to many experts in the above counter-arguments to the lies being told about us, and as we explained to the ECB officials when we sat down with them, in terms of economics/high finance/politics we know we’ve wandered miles out of our depth here. Ultimately however we rely on no-one but ourselves in all of this. 

We began this campaign on a single, simple, very fundamental premise – what’s been done to the Irish people, what’s still being done to the Irish people, is wrong. This was private debt, private commercial deals with all that implies (risk/reward, profit-and-loss), between private commercial institutions, no involvement whatsoever of the Irish people, yet we now find ourselves landed with the entire cost, plus interest.

Our own official institutions – banking, regulation, government – have all already let us down, under the previous administration and under this. We are forced now to go directly to Europe ourselves to ask for justice for Ireland.

FINAL APPEAL

Time and again Fiona appealed to them to look at this at the human level, explained that despite what they were being told, there was no feeling of recovery on the ground – quite the opposite, there is growing anger, growing despair.

We asked them to factor in to their various calculations the impact their policies are having on people, on their fellow citizens. We can quote all the various indices mentioned above but where is the index of human misery, of human stress?

All kinds of laws are being thrown at us in relation to why this bank-debt must be paid by the people; what of the higher laws enshrined in all our constitutions including that of the EU, what of human rights? What of the right to education, to health services, to a job, to a home, to water and electricity? Bit by bit these rights are being squeezed, sacrificed on the altar of high finance.

Trade apart, the original idea behind the establishment of the European Coal & Steel Community (1951) and the European Economic Community (1958) was to create a Europe of reduced nationalism, of enhanced understanding and appreciation of each other. The new EU/EC/ECB and its policies is having the opposite effect now, polarising people again, entire nations demonised (the feckless Irish, the reckless Greeks, the ungovernable Italians etc etc). 

A change of direction is needed, new thinking is needed, new policies are needed, people-first policies, an end to the diktats of the money markets.

SUMMARY

All of this we presented to the ECB officials. We don’t know if we made any impression; if we did, we don’t know how much of an impression, or if it was positive or negative. We did, however, leave the meeting with more hope than when we entered. Why? Because they had heard us out.

The meeting was also constructive in that previously, the ECB was this disembodied organisation somewhere out there; now we’ve come face-to-face with them, and they’ve come face-to-face with us. Hopefully we’re both the better for it.

They made no commitments, nor did we expect any. This is a process, that’s all. We thought when we started that the media would quickly be on board with us as they saw the massive injustice being perpetrated, that they would help alert the people who would take to the streets en-masse and we’d have all this done and dusted in short order, our government pressured into taking a stand. Now we know better.

We are forced to fight our own government, though we would prefer to have them with us; with only a few prominent allies (they know who they are) we are forced to fight our own national media, who ignore those of us who are trying to tell the truth but instead consistently repeat the government lines; ultimately, we have been forced to go to Europe directly ourselves.

This is now a long war but we’re in it for the long haul. It is taking a lot of personal sacrifice by so many of us but we’re heartened by the support gathering around the country, the heroic little groups like our own that are now marching in so many different locations.

JOIN THE CAMPAIGN – LOOKING FOR VOLUNTEERS

We want more to join us. It’s not too late – it’s never too late to do the right thing. Our march takes place every Sunday, same time, 11.30am; our aim has never changed, the lifting of this bank-debt burden.

We don’t know what happens next. We asked to meet the ECB again, will go to their HQ in Frankfurt (again!) if needs be. But at least now, and for the first time (which Michael Noonan had already told us but which the ECB officials confirmed), someone from Ireland has asked for bank-debt write-off.

Apologies for the length of this report but you know, with €31bn at stake with the ECB, there’s a lot involved!

Regards, Diarmuid O'Flynn.

MEETING WITH PATRICK HONAHAN (Governor, Central Bank Of Ireland)

July 16th 2013, 2pm 

PRESENT  

Patrick Honahan, Central Bank of Ireland (CBI)

Fiona Fitzpatrick, Charleville Bank-debt campaign group 

Diarmuid O'Flynn, Ballyhea Bank-debt campaign group 

BACKGROUND TO THE CAMPAIGN GROUP 

The ‘Ballyhea Says No to Bank-debt’ and ‘Charleville Says No to Bank-debt’ groups have been marching every week since March 6th 2011, two years four months and counting, in protest against the imposition of what we believe is illegal and truly odious private bank-debt on the people of Ireland. Our case is simple, our cause clear. 

The case: We believe the property bubble in Ireland and the subsequent bank crisis was caused by the launch of a seriously flawed new currency, the euro, with no proper foresight of the damage it would cause, no proper oversight of that damage as it was happening, no structures then in place to deal with the fallout when the financial tsunami first hit in Europe, Ireland the first casualty. 

The cause: Because this is a Eurozone problem there is a shared collective responsibility for the damage caused but there should also be a shared collective burden to repair that damage. Currently that burden has been disproportionately loaded on the Irish people; we want that burden lifted and distributed evenly across the Eurozone. Further, we want those whose reckless, exploitative and in some cases criminal actions following the launch of the euro, the top bankers and financial institutional gamblers, to also shoulder their share of that burden. 

BACKGROUND TO THE MEETING 

The Central Bank of Ireland (CBI) currently holds the Promissory Note bonds, the sovereign bonds created jointly by Finance Minister Michael Noonan and Mr Honahan to cover the remaining Promissory Notes remaining as of February this year, 2013; that amounts to a total of €25bn. Those bonds have already been issued by our National Treasury Management Agency (NTMA), were then taken over by the CBI who are now paying interest on them to the EU of just under 1% per annum - that’s how these things are done. 

Minister Noonan and Mr Honahan have drawn up a schedule for these bonds to be sold on to private investors (that schedule awaiting the approval of the ECB, by the way). Under the proposed schedule the first tranche of those bonds, for a mere €0.5bn (not so mere when it stands up to its full height, €500,000,000), must be sold on before the end of 2014. 

When that is done, four things happen:

1. The entire €500,000,000 thus generated is destroyed by the CBI;
2. We start paying interest (the coupon) of nearly 3% on that €0.5bn;
3. We stop paying the EU interest of 1% on that €0.5bn; 
4. In about 25 years (the ‘term’ of the bond), having got all their interest in the meantime, the bondholder(s) will be at the door of the CBI/NTMA looking for their entire €500,000,000 back.

This routine is repeated annually, the bond amounts increasing (there will be eight years at €2bn/yr), until the entire €25bn of P Note bonds has been taken in; it will be destroyed, the entire €25bn, interest at 3% will be paid annually to private investors (it will then be at €1bn/yr), the final tab for that €25bn will be picked up by our kids and grandkids. 

PURPOSE OF THE MEETING 

Our purpose was to convince Mr Honahan that because those new bonds are a) in lieu of Promissory Notes that were written to cover failed bonds in failed banks (Anglo Irish Bank €25.3bn and Irish Nationwide Building Society €5.3bn), and b) because those bonds were written to cover funds that were drawn from the Emergency Liquidity Assistance fund (‘liquidity’ assistance the key word here, when those banks were known to be already insolvent), €30.6bn in total but not a cent of which went to the Irish people, not alone should CBI not sell on those bonds, they should destroy them now, pay no interest to anyone for them. 

‘MEAT’ OF THE MEETING 

We began by asking about a previous sovereign bond issued in lieu of the 2012 Promissory Note payment of €3.06bn; Mr Honahan confirmed to us that this bond is in fact still intact and still held by the CBI, has not yet been sold on. 

We then asked about the first tranche of the €25bn, whether all or part of the first €500m had been sold on; again Mr Honahan confirmed to us that no, this bond too was still intact. 

This means that the CBI now holds all but the first payment (made by the current government, without fanfare of any sort, on March 31st 2011) of the original entire Promissory Notes total; that current total comes to €28.06; this is the sum we are now fighting for. 

From the outset though it was clear that there would be no meeting of minds. We outlined our case to Mr Honahan, he outlined his case to us, we both met a stone wall. 

TOUR-DE-FORCE v TOUR-DE-FARCE 

Several times Mr Honahan told us that this deal done by himself and Mr Noonan was an excellent deal, a negotiating tour-de-force by Ireland. In fact, mild-mannered man and all that he seemed to be, he was almost boastful about it. 

Several times we rebutted that claim; it was in fact a tour-de-farce – how can you claim any kind of success in negotiations, we argued, where you never asked for debt write-off never mind debt write-down, where you never even brought up the primary argument, that this entire debt is contentious, possibly illegal. 

On that, and just by the way, in the morning we met and were hugely impressed by David Hall, the individual who had taken the original High Court case against the Promissory Notes, that case now taken up by one brave TD, Joan Collins, and will be heard by a three-judge High Court panel in October, with the Promissory Notes/bond ‘deal’ now added – fingers crossed. 

It occurs to me as I write this that we should at least have looked for an assurance from Mr Honahan that he would hold all those bonds until this case is decided, though I doubt we’d have got that assurance. He wouldn't (understandably) give us an exact schedule of when he planned to sell on the bonds, said he had to gauge the market and pick his time; he did however make clear that it is his full intention to sell on all those bonds, per the schedule. 

THE FINAL EFFORT
As is our way, we had a fairly blunt discussion with Mr Honahan. He stated the government had a legal obligation to pay these bonds, we asked 'where were their legal obligations to us when this debt was being imposed on us'; he stated the government couldn't break its promises to the bonds markets, we asked if it was okay then for it to break its promises to their own people. Stalemate.
 

We made one final appeal to Mr Honahan, asked him if he would do something like this on a personal level, that if he found himself being strong-armed in a contentious and disputed personal debt situation, he would solve that problem by taking out a loan his kids and grandkids would have to pay. 

Three times it was put to him, three times he refused to answer, saying he couldn't even envisage such a scenario. Our belief is that he couldn't envisage the scenario where he would in fact take out those loads for his kids to pay, that he couldn't envisage the scenario where he would do on a personal level what he and Michael Noonan have done to this nation, and thus to this nation’s children. 

SUMMARY  

We learned that the entire €28.06bn (€25bn + €3.06 2012 Promissory Note bond) is intact in the CBI – this is a positive, means the entire prize is still there. 

We learned why Ireland is in the situation it’s in vis-à-vis Europe, that those we trust to negotiate on our behalf take up initial positions light-years away from where we feel they should be, that their every decision is governed by fear, no value put on freedom and independence, no value put on the human misery resulting from their fear-driven decisions. 

As we were leaving we asked Mr Honahan what the consequences would be were he to do as we asked and refuse to sell on the bonds and instead, simply destroyed them; he said there would be dire consequences to be suffered from the ECB, that this would be something he couldn't even begin to contemplate – he didn’t agree with ‘posturing’; neither did we, we told him, neither did we. We would make clear to the ECB our bottom line; we would mean it. 

CONCLUSION 

We have had a number of meetings with a number of people since all this started; rank amateurs we admit, getting into the ring with these top professionals and risking a beating. In every case, however, even with Mr Szekely of the EC, we felt we had made some sort of positive impact, left a few ripples in those very big ponds. We walked out the front door of the CBI building feeling not a ripple behind us, no impression made. 

We should I suppose have been feeling down, disheartened; Fiona and myself felt exactly the opposite. We knew now that our decision to start campaigning on our own behalf, on top of the weekly protest, was the right decision; we knew now that what we already strongly suspected was true – no-one on the official Irish side is negotiating hard on behalf of the people; rather, they are fearful and fear-driven. Under this government the austerity policy will continue, debt on odious debt will continue to be piled on the people. 

We headed for our evening meeting with the ECB more determined than ever. Into the lion’s den, yes, and I've said this already; we know we’re out of our depth, out of our league and leagues out of our comfort zone but against all their arguments about guarantees and legalities and complex financial engineering we know also one fundamental fact – we’re right. 

In imposing this bank-debt burden on us, what has been done to Ireland and its people by our own and by Europe, what is still being done to Ireland by our own and by Europe, is wrong. 

Regards, Diarmuid O'Flynn.