Bond payment 'an obscenity' - Noonan (2010)

Yesterday the Government refused to allow a debate on the payment of a controversial €700 million to unsecured, unguaranteed Anglo bondholders. However, Stephen Donnelly, independent TD for Wicklow and East Carlow, took the opportunity during the day's session to remind Michael Noonan of his comments in December 2010 regarding unguaranteed bonds. The text of his speech is below.

I will cite the words of the Minister in a contribution he made in the House on 15 December 2010 when he was essentially the Minister for Finance in waiting:

Ireland’s commitments on sovereign debt and debt under guarantee must be honoured in full. What legal or moral compulsion is on Ireland, however, to honour in full debt incurred by Irish banks when there was no State involvement in the arrangements? These loans were entered into freely by willing lenders and borrowers with absolutely no State participation. The interest rate charged represented the risk at the time and there never was a State liability. It is obscene that liability for these loans is now being transferred to the Irish taxpayer, in many respects to the poorest of the Irish taxpayers. In the budget the Minister for Finance reduced social welfare payments, punished the blind, disabled, widows, carers and the unemployed and he taxed the poorest at work, and for what? It was so that the taxpayer can take on liability for debts the country never incurred and arose from private arrangements between private institutions. What a disaster and an obscenity. How can the Government stand over it?

He continued:

The latest available bank data shows that Irish guaranteed bank debt has been sold on at a discount to hedge funds in the USA, the UK and Luxembourg, as well as to smaller speculative investors. The position has now become indefensible that the Irish taxpayer, even the poorest taxpayers, should be required to underpin the speculation of hedge fund investors.  There must be transparent, open, negotiated burden sharing of bank debt.

These are the words of a Minister for Finance of whom I would have been proud. I believe he continues to hold these views but has made a call that the lesser of two evils is to pay the money to the bondholders. At the start of this Dáil, the Technical Group called on the Government to hold a referendum on this issue.  Understandably, perhaps, it argued that we had just had a referendum, namely, the general election and it had, therefore, a clear mandate. I put it to the Taoiseach that the mandate his Government secured was for the position articulated by his Minister for Finance while in Opposition. If the Government now chooses to adopt precisely the opposite position, there is a strong case for putting the matter to the people again. We have heard the Taoiseach and Minister for Finance repeatedly state on the national and international airwaves that Ireland is a country that can pay its way in the world and will pay its debts. Every time they make this statement, they make it more difficult for the country to enter into voluntary arrangements such as those that were agreed with Greece first on senior bank debt and, more recently, on its sovereign debt.

Accepting that none of us wants to pay the bondholders, what is the case for doing so? I have heard three arguments. The Taoiseach this morning referred to an agreement with the European Central Bank. I have tabled parliamentary questions asking for details on the agreement. In reply, the Minister states he is not aware of any agreement, as was alluded to by the Governor of the Central Bank, Professor Patrick Honohan, in a television interview with Vincent Browne. As parliamentarians, we do not know what agreement is in place. The language being used, however, suggests a nod and a wink. I ask the Minister to supply to the House the details of the agreement and a cost-benefit analysis of the reason the Government has chosen this course of action.

The ECB's initial position was that it was of paramount importance that no senior debt or sovereign debt be restructured. Given that both types of debt have been restructured in Europe, that position no longer stands.  Further, the purported ECB threat that it would withdraw emergency liquidity assistance is not credible as to do so would achieve precisely the outcome the bank is trying to prevent, namely, the collapse of the European banking system. It is also reasonable to argue that no one agrees with the ECB. Ireland, for example, does not agree with it and the International Monetary Fund has stated publicly it does not agree with it. It is ridiculous to argue, as the ECB does, that choosing not to pay €715 million to people who we all accept are short-term speculative investors would collapse the European banking system. That is not a credible position. The Taoiseach referred to county councils this morning. By his own admission, however, we do not know who owns the relevant bonds and, as such, we do not know who we are bailing out.

I fully accept that the Taoiseach and Minister for Finance are acting in what they believe to be the best interests of the country. However, I and other Deputies have received hundreds of e-mails from people who point out that paying the bondholders is not the mandate on which the Government was elected. I ask the Taoiseach and Minister to reflect on that and, at a minimum, return to Parliament and lay out the pros and cons of the measure and allow the people to decide on the issue. {jathumbnailoff}