The Irish Government is to refuse to pay a $4 billion promissory note due on the Anglo Irish Bank debt next March – but it is only a stalling tactic.
Communications Minister Pat Rabbitte has confirmed that the scheduled payment will be missed for the second year running.
The latest decision to defer the payment will cost the Irish taxpayer over $2.5billion in interest payments on the IOU to Anglo bondholders.
Previously the Dublin government had postponed the 2012 payment before the fiscal treaty referendum in October.
The next payment is due in March but Rabbitte has insisted the huge fee will not be paid on schedule.
The Labour Party minister said: “We didn’t pay the promissory note this year and as far as I’m concerned we’re not going to pay it next year either. It’s as simple as that.”
The revealing comments from Rabbitte came against a backdrop of cabinet bickering between the coalition partners over the latest austerity budget.
The Irish Independent reports that the Irish Department of Finance has confirmed that Rabbitte’s comments are in line with previous remarks made by Minister for Finance Michael Noonan.
Speaking to Irish state broadcaster RTE, Rabbitte added: “We can’t pay. This was an IOU entered into by the previous government when the Anglo Irish Bank collapsed and the notion of us paying it next March doesn’t arise.”
The report states that sensitive negotiations are taking place with the European Central Bank over a reduction in the cost of paying for the wind-up of Anglo.
Rabbitte acknowledged: “The ECB is a difficult institution to bring around to stamping the deal but I believe it will be done before March 31.”
Rabbitte’s comments have been welcomed by fellow politicians.
Fine Gael chairman Charlie Flanagan told the Independent: “It is absolutely essential to get a favourable deal on the Anglo debt.
“The justified harsh reaction to the Budget is accentuated by the fact that most of the money saved will go to meet our promissory notes requirement. I find it hard to stomach.”
Labour Party chairman Colm Keaveney said: “A clear message has to be sent to Europe that an Anglo debt deal is a critical step towards economic recovery.
“We’ve honoured the debt of private banks and it’s causing great strain.”