Fianna Fáil Finance Spokesperson Michael McGrath has said the comments by ECB President Mario Draghi at the European Parliament today firmly put the focus on the length of time the Irish Central Bank will be able to hold the government bonds acquired under the promissory note deal.
Deputy McGrath stated, “In providing a complete assessment of the deal to restructure the promissory notes, the key unanswered question is how long the Central Bank will be allowed to hold on to the government bonds generated to replace the notes. We know that the Central Bank must adhere to a minimum disposal schedule but we also know the Central Bank is required to dispose of them ‘as soon as possible subject to conditions of financial stability.’
“Given Mario Draghi’s comments today that the disposal policy of the Irish Central Bank will be ‘crucial’, I am concerned that the ECB may force the Irish Central Bank to dispose of these bonds into the market at a more accelerated pace than envisaged. This would greatly diminish the benefits of the initial deal in that it could result in an increased cost of borrowing for the State and the interest payments would end up going to a third party rather than our own Central Bank.
“While the speculation about the deal unravelling seems wide of the mark, the government needs to ensure that the most valuable benefits from the deal are not in any way diluted by the ECB effectively forcing our Central Bank to offload the bonds into the market with earlier than planned.”