Wednesday, 3 July 2013


This is the text from a video that attempts to explain the deal done by Ireland's Finance Minister Michael Noonan last February when he transposed the contentious Promissory Notes to Sovereign bonds.

By January of this year most people were beginning to grasp how the Promissory Notes worked. It began in 2010, the then Fianna Fáil/Green coalition government issuing notes covering massive Central Bank funding of Anglo Irish Bank (€25.3bn) and Irish Nationwide Building Society (€5.3bn).
Both of those banks were already insolvent, were known to be insolvent, yet that money was drawn down from the EU’s Emergency Liquidity Assistance fund (ELA) with the full knowledge and approval of the ECB, thus defying their own guidelines; reluctant approval, it must be said, but approval nevertheless.

Liquidity is the key word – those banks didn’t have a liquidity problem, they were insolvent, should have been allowed fail. Instead the banks were kept on life-support as all their bonds were paid off, the bill then being transferred to the Irish people. Legal protection? Doesn’t exist for people, apparently.

In return for the €30.6bn thus pumped into those zombie banks, a schedule was drawn up whereby the Irish Central Bank, over time, would remove that same total from the exchequer.

This schedule involved the destruction of billions every March 31st

Year                     Amount                                        Total       Running Total
2010                    €0.20bn                                         €0.20bn         €0.20bn
2011 - 2023         €3.06bn/annum (13 yrs)             €39.78bn       €39.98bn
2024                    €2.10bn                                         €2.10bn       €42.08bn
2025 – 2030        €0.90bn/annum (6 yrs)                 €5.40bn       €47.48bn
2031                    €0.10bn                                        €0.10bn        €47.58bn

Looks pretty measly, that final payment doesn’t it? Not so measly when you extend it out to a very full €100,000,000. 

It all adds up to €47.58bn but that includes interest, which we were largely paying to ourselves – long story, too convoluted for here!

As the reality of this absurdity dawned on people there was outrage, rightly so. A broken economy borrowing €3.1bn every year to pay a debt from which we had never benefited, those billions then destroyed – what sense did that make to anyone? 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 very debatable debt (‘Totally illegal’, Finance Minister Michael Noonan admitted on national radio) into sovereign bonds.

NOONAN’S NEW DEAL (No, he's no Roosevelt!)
Here is what happens under the Noonan arrangment:
  • The Central Bank of Ireland now holds the remaining €28bn from the Promissory Note debt, €3bn from 2012 , €25bn from the leftover of the IBRC windup in Feb 2013, all in the form of newly-created bonds;
  • In tranches of €500m, the Central Bank sells those bonds to the National Treasury Management Agency, ostensibly for a profit (NTMA pays more than the €500m face value - I won't bore ye with the details); the Central Bank then gives that 'profit' to the government (borrowed millions on which we pay interest and on which we'll have to repay the principle eventually), but takes the €500m and destroys it, takes it out of circulation. We'll have to repay that too...
                     THE SCHEDULE
YEARS              AMOUNT PER YEAR             TOTAL

2014 – 2018:        €0.5bn/annum (5 yrs)               €2.50bn
2019 – 2023:        €1.0bn/annum (5 yrs)               €5.00bn
2024 – 2030         €2.0bn/annum (8 yrs)              €16.00bn
2031                     €1.5bn                                      €1.50bn

Not-so-grand total: €25bn
To be added to the above: €3bn bond from 2012.

NB: Update - the Central Bank has accelerated the above schedule, destroyed two tranches of €500m in 2014, then four such tranches in 2015, at least two more in 2016, though it was scheduled to destroy just €500m each year.

Irony of ironies: when this destruction takes place it's being reported as good news - we're informed about the 'profit', but nothing else!

All anyone needs to understand is this: in 2009/10, using government Promissory Notes as collateral, in blatant defiance of the ECB rules on bailing out insolvent banks, our Central Bank created €31bn for two zombies, Anglo and INBS. Those two banks were subsequently liquidated, were never going to be able to repay those billions; the ECB now insists that the Central Bank of Ireland must take that €31bn out of circulation. Which is what's happening - wholesale destruction.

Nothing that Noonan did in his 'deal' changed a syllable of that narrative.

What happens to the €500m that’s taken in before the end of 2014, what happens to the billions taken in before 2032? Exactly the same thing as happened to the €3.06bn Promissory Note every March; year after year, billion after billion, that money is destroyed by the Central Bank, every last cent.
Meanwhile, however, on all those borrowed and burned billions we’re paying interest, increasing annually til it totals approx. €47bn.

That’s not the end of it though, not by a long shot, because eventually those well-fattened chickens come home to roost. From 2038, having collected their interest, the bondholders come a-calling; they want their original money back, the money we destroyed, and now we have a new schedule, a repayment schedule.

2038                         €2bn   
2041                         €2bn   
2043                         €2bn   
2045                         €3bn   
2047                         €3bn   
2049                         €3bn   
2051                         €5bn   
2053                         €5bn   

Not-so-grand total again? €25bn

Just pause for a second and take that in. To cover private bank debt, we as a sovereign people issue bonds for €25bn which we then destroy; we pay interest on those bonds for decades, nearly €47bn in total (and could be a lot more), then we repay that €25bn in full. Does that strike you as a good ‘deal’?

Inter-generational national debt is normal; there’s nothing ‘normal’ about this. Normally a nation borrows for the benefit of its people but not a single cent of that €25bn will go towards our broken health system, towards easing the pain of the vulnerable, towards lifting the burden on middle Ireland. Not a single screw in a single door in a single classroom in a single school, not an inch of road network constructed.

The original Promissory Notes were for the exclusive benefit of banks, bankers and high financiers; the sovereign bonds that now replace them are exactly the same.

It was immediately claimed that the new ‘deal’ meant a saving of €20bn – lies, spin. Across a range of top economists - Seamus Coffey, Constantin Gurdgiev, Brian Lucey, Colm McCarthy, Karl Whelan – those ‘savings’ are estimated at between €3.5bn to €6.5bn but only if the ECB doesn’t look for an acceleration of the programme and also subject to several other fair-weather conditions.
Our question though – how do you effect ‘savings’ in paying a debt you never owed?

Apologies for the quality of this video, for its very amateur composition; we who are trying to get this message out don’t have an army of PR people, we haven’t been trained by Terry Prone or Bill O’Herlihy or Carr Communications, we don’t have any highly-paid ‘advisors’; we have Windows Live Movie-Maker and we have the truth, the unvarnished truth.

The spin from the government and its cheerleader spinmeisters is this: ‘Look, we know the debt is being passed down to our kids and grandkids but sure that’s normal – aren’t we making things easier on ourselves for a few years, and saving billions?’

What they’re diverting you from, but what we want you to know, 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, assuming a debt for our kids and grandkids that was never ours and was certainly never theirs.

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.