A move by the Irish government in March to buy Irish Life Assurance for 1.3 billion euros ($1.7 billion) could jeopardize its attempt to keep 30 billion euros in debt off its balance sheet, after the deal changed the status of a special-purpose vehicle that owns the debt.
Reuters reported Thursday that the holding company National Asset Management Agency Investment (NAMC) was created to eliminate 74 billion euros in risky loans for land and development. The holding company does much of its business via a special-purpose vehicle that, for EU accounting purposes, permits the Irish government to keep NAMC's debt off its own balance sheet.
However, that special status was placed in jeopardy after the Irish government made a move to buy Irish Life, which is one of the three private-company owners of 51% of NAMC. With the purchase, the ownership structure is changed, potentially putting the special-purpose vehicle into majority government control.
Even if it manages to keep 30 billion euros in debt owned by NAMC off its balance sheet, the Irish government debt will hit 119% of GDP in 2013, thanks in large part to the expense of its bailout of Irish banks. Greece and Italy had similar debt levels before the onset of the European debt crisis.
Ireland is attempting through talks with the European Union to keep that additional debt off its books, and a spokesman for its department of finance said that there has been "ongoing engagement" with Eurostat over the past several months to that end, since the sale of Irish Life was proposed.
The spokesman was quoted saying, "The department is satisfied that this matter will not result in NAMA being brought on to the government balance sheet."