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:
- The entire €500,000,000 thus generated is destroyed by the CBI;
- We start paying interest (the coupon) of nearly 3% on that €0.5bn;
- We stop paying the EU interest of 1% on that €0.5bn;
- 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.
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.
