The former CFO of Anglo Irish Bank has warned that Ireland’s promissory note deal with the European Central Bank could be ‘illegal.'

Maarten van Eden has written an article for the Sunday Independent newspaper warning that the historic deal may not stand up to legal scrutiny.

The Irish government has celebrated its deal with European Central Bank over the promising notes for Anglo, now known as the IBRC.

But former Chief Financial Officer with Anglo, van Eden has described the deal as being in breach of the ECB’s ‘fundamental rule against monetary financing.'

Described as a straight talking Dutchman with over 30 years experience on the international finance scene, the paper says van Eden’s comments on the legality of the prom note deal certainly won’t be welcomed by Finance Minister Michael Noonan.

German Bundesbank president and ECB governing council member Dr Jens Weidmann has also voiced his own concerns on the legality of the Irish deal.

The paper reports that ECB president Mario Draghi heightened those concerns even further last Friday when he confirmed that the deal would be re-examined.

Van Eden wrote: “What does this precedent imply down the road for countries such as Spain and Italy, or other countries for that matter? What is the implication for the integrity of the euro if all countries were to monetise 20pc of national income in debt?

“The Government has decided to abandon the orderly wind-down of Anglo, which will cost Ireland unnecessarily and is going to exacerbate creative accounting with even more creative accounting and legal posturing.

“It is effectively capitalising interest and deferring debt, which, by the way, was one of the abhorred practices of the bank that is no more.”

Van Eden has also argued that Ireland’s coffers could suffer an immediate loss of up to $4billion in the coming months as the IBRC’s special liquidator Kieran Wallace either sells the loans on its books or transfers them over to Nama.

He added: “First and foremost, expediting the sale of the remaining €15bn of net loan assets of IBRC will mean a loss of approximately 20 per cent (that is €3bn) over and above what could be realised in an orderly wind-down of IBRC as a banking institution. This is nothing new and was analysed extensively in the past restructuring plans.”

“IBRC’s special liquidator will be required to repay all its creditors in full on the basis that the Government has clearly engineered the liquidation and therefore, on the basis of legal advice given in the past, one will not be able to successfully invoke default in court.”

Noted UCD economist Colm McCarthy has also expressed his fears to the paper for the future of the promissory note agreement.

McCarthy warned: “Central Bank governor Patrick Honohan expressed confidence in an RTE interview last Sunday that the promissory note deal with the ECB would not unravel. A week later, the unravelling appears to have commenced.

“It will be time for the Irish Government to test the legality of what was done by Trichet’s ECB in 2010.

“There are explicit provisions in the ECB statute which entitle a member state to challenge the acts of the ECB at the European Court of Justice.”

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