Ireland to Use Bond, Not Cash, to Make Payment

Ireland will make a scheduled payment of 3.1 billion euros ($4.1 billion) to the Irish Bank Resolution Corp. (IBRC) at the end of March with a bond, not with bailout cash. Finance Minister Michael Noonan said that the move was designed to provide flexibility around the country’s eventual return to capital markets.

Bloomberg reported that the move buys time for Ireland to win concessions on the terms of its 2010 bailout that will be easier on its people. In the wake of concessions made to Greece for its second bailout, it appears that greater flexibility may be available for the Irish as well, and the bond payment in lieu of cash provides breathing space for Ireland to negotiate.

Noonan was quoted saying that Greece’s second rescue “could be taken as a signal that the European authorities no longer see” the existing terms of Ireland’s bailout “as set in stone.” He added that a wider solution is more likely in autumn than in July, and told lawmakers in Dublin, “The funding that would otherwise have been used to make the payment should potentially allow greater flexibility around when and at what level Ireland returns to the capital markets.”

Thomas Costerg, an economist at Standard Chartered Bank in London, was quoted saying, “This temporary solution allows the Irish government to gain some time to try to extract as much concessions as possible from the Europeans and the European Central Bank [ECB]. Given all the concessions made to Greece recently, Ireland has the upper hand in the negotiations with the EU [European Union].”