There have been a number of news stories in the past day or so (e.g. this one) which have noted that despite earlier stories flagging that Patrick Honohan was going to raise the issue of promissory notes at the ECB Governing Council meeting on Thursday, Mario Draghi said that it was not discussed at the meeting.
I think it’s probably worth pointing out that (at least as I understand it) the Governing Council members meet for dinner the night before the Thursday meeting and key issues often get discussed there so that when the actual meeting happens, the ECB President can say with a straight face in response to questions that certain issues were not even discussed at the meeting. It’s an old trick.
A better signal that, indeed, there is unlikely to be a re-working of the notes any time soon (or perhaps ever) was this story from the Irish Times written by Arthur Beesley, which is pretty clearly based on a briefing from an ECB insider (probably a high-ranking one). Some of it is pretty painful, e.g.
Given that there is money available in the bailout plan to pay the €3.1 billion due on March 31st, the case is being made that any delay would seriously erode the Government’s standing with markets at a time when Ireland’s return to markets is still not assured.
The idea that sovereign bond investors are actually keen to see the government burn €3.1 billion a year on promissory note payments is fairly ludicrous.
This is also quite pointed:
Within the ECB, the view remains that alternative avenues are open to the Government to improve its finances, among them reductions in public sector pay and welfare entitlements.
The argument is made that average public pay and welfare levels in Ireland are higher than the average in some of the other euro zone countries that are supporting Ireland’s bailout, among them Spain, Slovenia and Slovakia.
I think there’s an element of apples and oranges here. Yes, more fiscal adjustment is required, and public sector pay and welfare rates are part of the mix. But the ultimate objective is to allow Ireland to finance itself independent of the EU and IMF and without some reduction of the burden of the existing debt, much of it bank-related, that probably isn’t going to happen.
Anyway, the key point is that if a deal doesn’t happen, it will be because the ECB Governing Council didn’t want a deal, not because Patrick Honohan failed to raise the issue.