1)
In
2009/10, using Promissory Notes (government guarantees
issued by then Finance Minister Brian Linehan), the Central Bank 'created' €31billion for Anglo Irish Bank (€25.5billion)
and INBS (€5.5billion);
2)
Those
two banks were insolvent and were thus prevented by ECB rule
from access to the Emergency Liquidity Assistance programme (ELA);
3)
The
P Notes were accepted by the ECB/Irish Central Bank as collateral
- clear breach;
4)
Everyone
involved – the Irish Central Bank, the Government and most critical of all, the
ECB
– knew all this, knew those P Notes were
literally papering over not just cracks but a fatal hole below the waterline of
the two banks involved; however, in the absence of any formal structures to
deal with troubled banks within the new euro currency area (fatal flaw in its
design), needs must – it was a crisis situation;
5)
The banks went under, as was inevitable;
6) The ECB insists that the €31bn
'created' as a result of the P Notes must be taken back out of circulation –
Ireland forced to pay for the euro design flaw;
7)
Rather than challenge the ECB on the
legitimacy of all this, in 2013 new Finance Minister Michael Noonan transposed
those bonds to sovereign debt, created a schedule of destruction;
8)
Chunk by chunk, €500million by
€500million, that schedule is now being followed (accelerated even) by the
Central Bank;
9) The process is this:
i.
Using previously borrowed money, our
National Treasury Management Agency (NTMA) buys one of the P Note bonds issued
under the Noonan 2013 ‘deal’ from the Central Bank (usually a tranche of
€500million);
ii.
The Central Bank destroys that €500million
(probably just the push of a computer button), declares that element of the €31bn
P Note debt 'cancelled';
iii.
The €31bn is reduced by that amount – we still
have over €20bn remaining to be thus destroyed;
iv.
The money that was used by the NTMA to buy
that P Note bond will eventually have to be repaid and in the meantime we pay
interest on it;
v.
The
critical thing to know, however, is that the Irish people get absolutely no
benefit from that €500m.
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| Burning billions but it's no joke... |