Wednesday, 30 December 2015


The ongoing cancellation of the IBRC Promissory Note bonds and subsequent destruction of the money raised is a three-part process: 
  1. The National Treasury Management Agency (NTMA) issues sovereign bonds from which it raises billions of euro – this becomes part of the national debt, interest paid on the bonds from the date of sale, the principal to be repaid when those bonds mature; 
  2. In increments (so far) of €500m, the NTMA uses some of those billions to buy the IBRC Promissory Note bonds held by the Central Bank of Ireland; 
  3. The Central Bank of Ireland destroys the hundreds of millions received from the NTMA and that portion of the €31bn Promissory Note debt is declared ‘cancelled’, thus satisfying the ECB. This is the most critical of the three elements, in fact the raison d'être for the entire exercise – Quantitative Squeezing is what MEP Luke Ming Flanagan has titled it, the ECB-ordained destruction of the entire €31bn used to bail out the failed creditors of two failed Irish banks, Anglo Irish and INBS.

This week, March 2016, the Central Bank of Ireland destroyed €500,000,000, half a billion euro, a sum it received from our National Treasury Management Agency (NTMA) that had been borrowed on the financial markets; last year, 2015, in four similar tranches of €500m, our Central Bank similarly destroyed a total of €2bn; in 2014, it was €1bn - all of those billions given to them by our NTMA from funds it had raised from sovereign bond sales.

NONE of our national media reported the above; those that did, reported only that an IBRC bond had been 'cancelled', while some even suggested it was a 'good news' story, that we had gained on the whole deal! 'A profit of €180m handed over to the Exchequer!' it trumpeted, never bothering to question whence this 'profit' originated - it came from our NTMA, the ones from whom the Central Bank was getting all those hundreds of millions, all of which is borrowed.
The actual Promissory Note bonds are easily explained and understood:
What happens to a house built on dodgy foundations, a house missing many critical support pillars and beams? It collapses. So it was with the euro and so it is that now, 17 years after the currency was launched in 1999 and several years after that collapse, the EU is trying to salvage what's left, trying to install those structural pillars and beams (Single Supervisory Mechanism, Single Resolution Mechanism etc. etc.) in a building that is still tottering on the brink.

When the banking crisis hit Ireland there were still no such structures in place to deal with troubled banks and as a direct result of that negligence, Ireland suffered a major hit

The EU, however, the ECB in particular, DID have a policy – no bank would be allowed fail. So in 2009/10 when Anglo and INBS were already (to anyone with even half a brain) obviously insolvent, a fudge was concocted between the Central Bank of Ireland, the Irish government and the ECB to save those banks. This involved the issuance of Promissory Notes by the Irish government, accepted as collateral by the Central Bank of Ireland/ECB, and funding eventually amounting to €31bn was issued to the two insolvent banks from the Emergency Liquidity Assistance (ELA) fund.

Despite the fact that this was done principally to save bigger banks across the eurozone, in Germany and France particularly (Anglo and INBS were non-systemic to the Irish banking system); despite the fact the ECB colluded in the circumventing of its own rules on use of the ELA; despite the fact all involved knew that Anglo/INBS (later combined to become IBRC) would never be able to repay those billions, the same ECB now insists that Ireland must take that entire €31bn back out of circulation.

We don’t have it (we’re broke, up to our necks in debt) so we borrow it, and tranche by €500m tranche our Central Bank destroys it – the three-part system described above.

Is all this too complex to understand? Why are not being told what’s happening? We in the Ballyhea Says No understand, we know what’s happening, down to the last sordid detail. 

We are determined that all in Ireland should also know, that all our friends in Europe (and we have many) should know. 

And we are determined that however long it takes, this wrong will be righted. Water under the bridge? The Central Bank of Ireland still holds €25bn in Promissory Note bonds, awaiting sale, that money then destroyed. That’s a lot of water yet to flow…

How the Irish Times sees the destruction of €500m

Regards and thanks,
Diarmuid O'Flynn