Irish Prime Minister Enda Kenny declared victory in his fight to ease the burden of the nation’s rescue of the financial system, boosting his bid to regain the country’s sovereignty.
Under the plan, dubbed ‘Project Red,’ Ireland will swap so-called promissory notes used to rescue the failed lender Anglo Irish Bank Corp., with long-term bonds with maturities of up to 40 years, Kenny said in parliament in Dublin today. The accord will ease the nation’s borrowing needs over the next decade by 20 billion euros ($26.8 billion), he said.
“Today’s outcome is an historic step on the road to economic recovery,” Kenny said, to applause from his lawmakers. “A successful Irish exit from the bailout by the end of this year would prove that a combination of intensive national reform efforts and European solidarity can deliver results.”
Kenny and his government staked their political credibility on winning agreement from European Central Bank, as the government races to exit the international bailout the country sought in 2010. Irish taxpayers faced a 63 billion euro-bill for rescuing its debt-laden banks after a real estate bubble burst, leaving the nation on the brink of bankruptcy.
This “looks like a good deal, as good as can be expected,” said Cathal O’Leary, head of fixed income at NCB Stockbrokers in Dublin. “We expect the rating agencies to give Ireland credit for this move and an upgrade could be expected.”
Ireland’s two-year notes rose, pushing the yield down four basis points, or 0.04 percentage point, to 1.34 percent. The nation’s 5 percent bonds maturing in October 2020 were little changed, leaving the rate at 4.10 percent.
Kenny will now turn his attention to persuading Europe’s rescue funds to buy its stakes in the remainder of the financial system, including Bank of Ireland Plc and Allied Irish Banks Plc.
The Anglo accord is “no silver bullet to end all our economic problems,” said Kenny. “The damage done by these financial institutions will take many years to rectify.”
Speaking to reporters in Frankfurt, ECB President Mario Draghi said the Governing Council took “note of” the Irish government’s plan, and said to comment on what the national government or national central bank is doing wouldn’t “be right.”
Draghi’s comments translate into “deal is done,” Ryan McGrath, an analyst at Cantor Fitzgerald in Dublin, wrote in a note.