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Roundup-Gov't looking at 40 yr bond

Tuesday, September 18 08:26:33

The Government is considering issuing a 40-year bond to refinance the bailout of Anglo Irish Bank, allowing it to significantly reduce its annual repayments to cover the cost of the bank's collapse. The bond would replace the promissory note scheme through which the State pays off Anglo Irish Bank's debts, according to Bloomberg reports, citing two sources familiar with the matter. The main advantage of issuing a long-term bond is that the State would not have to pay the E3 billion a year it gives to the Irish Bank Resolution Corp (the former Anglo) on the back of the promissory notes. At present, the bank takes that money and gives it to the Irish Central Bank, which is funding IBRC through emergency liquidity assistance.

A Government spokesman declined to comment last night beyond saying that "complex technical discussions are ongoing and the objective is to deliver the best deal possible for the Irish taxpayer". Opting to issue a bond would mark a change of focus by Minister for Finance Michael Noonan, who has favoured accessing the euro zone's long-term bailout fund, the European Stability Mechanism (ESM).

However, the bond plan would sidestep likely political oppposition within the EU to using ESM funds to refinance the bank's funding. Under the proposal, the State would issue the long-term bond to IBRC. It, in turn, would take the bond to the ECB as collateral which, if acceptable to Frankfurt, would allow the central bank to provide funding, replacing that currently coming from the Irish Central Bank. The Irish Times

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The long-awaited Credit Guarantee Scheme -- which seeks to provide E450m worth of credit to 1,800 Irish exporters -- is bound to fail, the Irish Exporters Association (IEA) claimed yesterday. Under the scheme, which is due to be launched later this month, the Government plans to charge exporters a 2pc fee for accessing credit. This will be levied on top of normal bank interest rates which companies are also expected to pay. In addition, exporters will be restricted to applying for loans that amount to 10pc or less of the amount they already owe their banks.

"In its current framework, this is an incentive scheme without any visible incentive," says John Whelan of the IEA, who contrasts it with the successful UK scheme on which it based. While the British government also levies a fee for usage, it has persuaded the participating UK banks to offer a preferential interest rate for those who avail of it, with the end result that they pay 1pc less overall. The Irish Independent

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Chancellor Angela Merkel appeared to be at the height of her powers in Berlin yesterday as she batted away questions on a wide range of topics from riots in Khartoum to the prospects for Ireland's economic survival. With an election next year that she looks set to win, Ms Merkel's views remain of vital importance to anybody trying to discern what a solution to the European debt crisis will eventually look like. Dressed in a cream coloured jacket, the smiling chancellor looked as if she hadn't a care in the world, but behind the facade she knows things in Germany are getting serious. The economy is close to recession while it is now only a matter of time before Spain seeks a bailout which will bleed German voters just as the 58-year-old kicks off her election campaign. Greece is preparing for a third bailout while Cyprus repeated last weekend that it too needs help. And Italy could be next.

With all these headaches, it is little wonder that Ms Merkel is reluctant to support Finance Minister Michael Noonan's efforts to tear up our promise to repay our debts and give us something less onerous. From an Irish perspective, Mr Noonan's suggestions make perfect sense: we simply can't afford to repay our debts. From a German perspective, Mr Noonan's plans open a can of worms better left closed.

Any deal that cuts our costs is sure to encourage other countries to seek similar measures which could end up costing Germany tens of billions of euro. For Ms Merkel, this is not a question of right or wrong; she knows every option is dangerous but has decided to continue doing as little as possible to prevent her own country being dragged down too. The Irish Independent

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Irish whiskey hasn't had it easy. It was once the leading whiskey in the world before falling far behind its Scottish counterpart. Nowadays it is accepted that if you walk through duty free in most big airports you will see dozens if not hundreds of obscure Scotch whiskies in fabulous wooden cases on sale for hundreds of euro, and maybe a handful of relatively cheap Irish brands, usually without a case at all. Things are beginning to change though, and Alltech's decision to set up an Irish whiskey business in Carlow is the latest piece of good news for the sector. Jameson has been confirmed as one of the best-selling spirits in the world for Pernod Ricard, while Beam forked out E76m for Louth based Cooley Distilleries in January.

Alltech boss Dr Pearse Lyons talked up his Irish connections as motivation for the move, but if the sector wasn't growing, there is little chance he would have invested in the business. The other attraction is that set-up costs are minuscule. It is remarkably easy for the man on the street to open a distillery, with little in the way of government regulations to deal with. None of the main distilleries in Ireland operating now are Irish-owned, but is that really a bad thing?

The jobs are here, and the products -- Bushmills, Powers and many others -- are still unequivocally Irish. After a century of mismanagement, whiskey looks to be finally on the charge again. The Irish Independent