Promissory Note “Deal”: Not What Had Been, Em, Promised

Yesterday’s promissory note announcement was so complex that one might imagine that the government’s officials have been cooking up the various different elements for months. However, there is some fairly strong evidence that the additional elements (the role of NAMA and Bank of Ireland) reflect last-minute changes forced on the government by the ECB’s refusing to give any ground.

The reason I was surprised yesterday afternoon to hear of NAMA and Bank of Ireland’s involvement is that the shape of the deal that was supposed to be announced had been pretty well flagged beforehand and yet this deal was different.

What had been flagged in the moments leading up to the announcement was the IBRC were going to receive their cash payment from the promissory note but (and this is the crucial bit) rather than use it to repay ELA, they would use it to purchase a bond.  The actual announcement say them make an ELA repayment via incurring a debt to Bank of Ireland that must be repaid next year.

Why do I say the original plan was a cash payment to be used to purchase a bond? Well, for starters, there’s the IBRC’s own annual report, released yesterday morning but presumably sent to press a few days beforehand. On page 168, it describes the proposed arrangement as follows:

Following an outline request, made on behalf of the Minister for Finance, the Bank is in discussions with the Department of Finance and the NTMA regarding a settlement proposal to utilise the funds due from the next instalment under the promissory notes on 2 April 2012 to acquire an Irish Government bond with an equivalent value.

“Utilise the funds … to acquire a bond” can’t really mean anything other than receiving a cash payment and using it to buy a bond rather than pay off ELA.

Then we had Governor Honohan’s appearance at the Oireachtas Finance committee on Tuesday. Honohan was given a number of chances to describe the deal in the offing and in each case chose to describe it as a cash payment that would then be used to buy a bond.

For example, here’s an excerpt from Deputy Michael McGrath’s questions

Deputy Michael McGrath: In the course of public disclosure, originally made early last week, of the shape of the deal on this month’s payment, it was stated the cash payment would be made by the State to Anglo Irish Bank but that in return the bank would buy an Irish Government bond.

Here’s the portion of Honohan’s answer relating to the cash payment.

Professor Patrick Honohan: With regard to cash payments, the detail is still not absolutely final. Assuming this arrangement works out, when it is complete – even if it takes a few more days – any cash payment would circle back. There will be no net cash outlay and any cash payment made by the Exchequer would come back.

Here’s Honohan replying to Deputy Pearse Doherty

Professor Patrick Honohan: That speaks to the issue of cash payment. A cash payment which is immediately extinguished by another transaction is still a cash payment which is valuable for communicating to markets that the Government does make its payments, even if the total effect of the transaction is to extinguish that cash payment and have the cash come right back to the Government in a prompt manner. I hope there is no tendency to get terribly excited about a cash payment which is rapidly extinguished.

Finally, when asked about Deputy Stephen Donnelly about IBRC’s cash needs, the Governor replied

Professor Patrick Honohan: The question I noted in particular related to how much cash IBRC needs. In fact, the objective of the plan is to eliminate the cash need by postponing it.

However, in actual fact, under the current plan the IBRC has a €3.1 billion cash need that it is honouring by means of a complex chain of transactions in which it borrows from NAMA and Bank of Ireland. There is no sense in which the IBRC’s cash needs have been postponed.

I can only assume that the “assuming this arrangement works out” element of Honohan’s reply to Michael McGrath didn’t actually work out. And the likely reason for this failure was that the ECB insisted, as it appears they had all along, that a €3.1 billion ELA repayment be made, something which required a cash payment.  That this cash has been temporarily sourced from NAMA and then Bank of Ireland doesn’t at all change the fact that this deal is not what had been flagged and does not have nearly the benefits of that deal.

Optimistic ministerial talk of “movement from the European authorities” seems highly misplaced.  (If the original proposal had gone through, there would have been some grounds for such a statement.) More accurate, I think, were junior minister Brian Hayes’s comments on Today FM to the effect that negotiating with the ECB was negotiating with bankers and you couldn’t get far with that, and that future negotiations needed to be with European politicians.

Promissory Note “Deal” Fails to Meet Low Expectations

Despite a lot of hype in recent weeks that the Irish government were going to arrive at a deal with the ECB that would reduce the burden imposed by promissory note payments to the IBRC, I had remained fairly skeptical that any announcement this week would represent significant progress.

In my last post on this issue, last Saturday, I had noted that any deal that was done was just in relation to the March 31 payment and did not affect future payments. I had written:

Is it likely that the ECB will agree at a later date to a more comprehensive restructuring of the promissory notes allowing for a systematic payment deferral? I would guess not. While you could argue that a deal on the current payment shows some flexibility on the part of the ECB, an alternative viewpoint is that six months of “discussions” failed to get anything other than a fairly meaningless one-off deferral.

My pessimism turned out to be too optimistic. In fact, it appears that the Irish government made essentially no progress with the ECB even regarding the current payment.

The arrangement arrived at today (ministerial announcement here) is so complex that it will bamboozle everyone and this confusion will provide plenty of cover for those who wish to claim that it represents useful progress. However, effectively what is happening is that the Irish government are providing the IBRC with a long-term bond, the IBRC are exchanging that bond with Bank of Ireland for one year in return for €3.1 billion in cash and this cash will be used to repay the IBRC’s Emergency Liquidity Assistance (ELA) loans.

What has been achieved? In essence, the government has delayed paying out the cash for this year’s €3.1 billion but the IBRC (and hence the state) now has to repay Bank of Ireland this amount next year. This is effectively a one-year deferral of this payment, which is far worse than the long-term deferral of the payment that I had already described on Saturday as “fairly meaningless”.  Because the ECB have fully achieved their goal — getting a full €3.1 billion ELA repayment — calling this “a deal” with the ECB is hardly appropriate. Rather, it represents an arrangement with a privately-owned Irish bank that maintains the appearance of some sort of deal having been agreed with the ECB.

What further puzzles me about this transaction is that Governor Patrick Honohan described the plan to the Oireachtas Finance committee on Tuesday as follows:

The arrangement regarding this first tranche is very much in the direction in which I want us to go. It is a major step forward qualitatively in the approach.

I guess one could say it is “the direction we want to go” in the sense that this arrangement represents a deferral of the cash payment, however short-term. But the actual arrangement used to implement this deferral — borrowing the cash on a short-term basis from a privately-owned bank — is not at all a sustainable way to refinance a debt that amounts to almost 20 percent of GDP. So I fail to see how this is a major step forward, qualitative or otherwise (I had been puzzling about qualitative major steps ….)

Where does this leave us? In the same position as I reckoned we were last Saturday. No deal of any substance has been done with the ECB nor is one forthcoming. An arrangement to borrow long-term funds from EFSF or ESM to pay off IBRC’s debts and retire the promissory notes may happen. But it would require political approval across Europe, will not happen before Ireland passes the Fiscal Compact and would effectively amount to a second EU-IMF bailout with all the terms and conditions that this implies.

Standalone Deal on March 31 Payment Not Important

There has been a lot of media coverage in Ireland this week of a potential deal in the coming days involving the promissory notes issued by the government to the IBRC.

A comprehensive restructuring of these notes, worth about 20 percent of Irish GDP, would be beneficial to Irish debt sustainability. There have been various comments about this issue on Irish discussion boards and blog comments to the extent that a maturity extension would have no benefits as it does not change the debt-GDP ratio and “debt is debt”.  To that, I would ask people if they took out a €100,000 loan, which would they find easier: Paying the debt back over one year or over thirty years? “Debt is debt” is a fairly limited insight when thinking about the question of whether a particular debt burden is sustainable.

That said, the recent reports (e.g. here and here) make it clear that the any deal done in the next week, if it occurs, will only involve the €3.1 billion payment due on March 31.  The Irish proposal appears to involve either making the March 31 payment with a long-term bond or else making the payment in cash and having IBRC immediately loan it back to government by purchasing a long-term sovereign bonds.

These proposals would make essentially no difference to Irish debt sustainability as they don’t have any impact on the burden of future payments. And to be fair, Minister Noonan appears to acknowledge this. This RTE story reports him as follows

He also said the deferral of the payment at the end of March was just one element, and that the bigger picture was to secure an easier way of paying the promissory note. He said this would be less onerous on the taxpayer and that the serious piece of negotiations would happen in the second part of the year.

Is it likely that the ECB will agree at a later date to a more comprehensive restructuring of the promissory notes allowing for a systematic payment deferral? I would guess not. While you could argue that a deal on the current payment shows some flexibility on the part of the ECB, an alternative viewpoint is that six months of “discussions” failed to get anything other than a fairly meaningless one-off deferral.

If a shorter-term deal is struck, my guess is that it will occur because the ECB are hoping that the EU will provide the funds before March 2013 to allow the promissory notes to be retired.  Such a deal would see EFSF or ESM providing a long-term low-interest loan to the Irish government, which would then provide the money to IBRC in return for the promissory notes, with the money then used to pay off ELA debts.

Of course, such a deal would require political approval of EU governments and, specifically, Germany, and thus would require passing the Fiscal Compact. As any such deal would require all the political manoeuvrings associated with a second bailout, it may well also involve additional funds to help deal with the ongoing problems in the rest of the Irish banking sector (very well documented in the Central Bank’s excellent and surprisingly frank Macro-Financial Review) as well as the provision of “standby” funds to cover future deficits.

Will the March 31 deal happen? The consistent briefings from Minister Noonan would point to the likelihood that it will, as he has now pushed things to the point where he will have some pretty serious egg on his face if it doesn’t happen. Alternatively, the same officials who have been briefing that a deal will happen have also been bringing up various red herrings like “we need to make sure we don’t have a technical default” or “there may be legal issues with payment via bonds”. This stuff hardly instils confidence and the brinksmanship suggests there are very strong forces on the other side who do not wish to see this deal happen.

Anyway, relative to the long-term issues of a permanent restructuring of the notes and the problems afflicting the Irish banking sector, the question of the March 31 payment is a side-show. As such, I hope the government has not wasted too much political capital on it. Noonan’s statements this week are likely to have been seen as megaphone diplomacy by some members of the ECB Governing Council and it would be a pity if they have caused longer-term damage in return for a limited short-term gain.

Micheal Noonan’s Statement on Promissory Notes: March 21, 2012

Dáil Éireann Private Members’ Business

Counter Motion Government Speech

Wednesday 22nd March

Check against Delivery

I move amendment No. 1:

To delete all words after “Dáil Éireann” and substitute the following:

Notes that:

The European Stability Mechanism (ESM) Treaty is an important part of the significant number of initiatives which have been taken at EU level to ensure the economic and financial stability of the Euro Area and the EU as a whole which include 

–          The establishment of a temporary support facility – the European Financial Stability Facility and also the extension of the use of the EU’s European Financial Stabilisation Mechanism facility.

–          Agreement to enhance the effectiveness of the EFSF though increased lending capacity and additional flexibilities

–          Agreement to reduce the interest rates and lengthen the maturities for Programme countries

–        Agreement to establish a permanent support facility – the ESM – by July 2013 to replace the temporary EFSF and EFSM arrangements

–        Agreement to include the new EFSF flexibilities in the ESM

–        The agreement to accelerate the entry into force of the ESM Treaty to July 2012 (subject to ratification by Member States representing 90% of the capital commitments).

–        The agreement at EU level to provide significant  additional resources to the IMF

–        The agreement to reassess in March this year the adequacy of the overall ceiling of the EFSF/ESM of EUR 500 billion.

–        The agreement to provide substantial additional support to Greece and the enhancement of its debt sustainability

–        The enhancement of economic governance with the strengthening of the Stability and Growth Pact through, for example, the six pack of legislative measures and also the agreement on the Stability Treaty

–        the ECB’s significant initiative to provide liquidity of up to €1 trillion in support to the EU banking system

And that the Government has participated actively in the development of these initiatives, as appropriate, which are in Ireland’s and in Europe’s interests

And notes that the Government will decide on the appropriate timing for legislation to ratify the ESM Treaty in due course, with regard to the agreed timetable at European level for ratification”

Firstly, there is an issue that I wish to bring to the attention of the house as the Government has always committed that we would inform the Dáil about any development concerning the payment of the promissory note at the end of this month.

In more recent months, we have been involved in technical discussions on reducing the burden of debt associated with the recapitalization of the banks.   In particular our focus has been on the Promissory note arrangement that was put in place to fund the Irish Bank Resolution Corporation – formerly Anglo Irish Bank and Irish Nationwide. This is an arrangement, which requires the State to make cash payments of €3.06 billion each year to IBRC. There have been some developments on this issue during the day.

The discussions with the European authorities on the general issue continue but we are now negotiating with the EU authorities, and principally with the ECB, on the basis that the €3.06 billion cash installment due from the Minister to IBRC on 31 March 2012 under the terms of the IBRC promissory note could be settled by the delivery of a long term Irish Government Bond.  The details of the arrangement have still to be worked out.

This allows me now to turn to the core of the motion before the House – The Government’s extremely constructive engagement with the EU and whether or not we want to put in place appropriate support mechanisms at European level.  We all know that these are needed.  So I want to recap on how Europe has reached its current position.

Europe, and indeed the broader global economy has been in the throes of an economic and financial crisis for a number of years now.  The approach of providing support mechanisms started with the Greek Loan Facility in early 2010.  That was a specific measure for Greece.  It was followed quickly by action to put in place a more general support facility – the EFSF – which could be used for any Euro Area Member State.  This was a temporary mechanism which will expire in 2013.  It turned out that Ireland was the next country to require assistance – in late 2010.   By that time it was clear also that a permanent mechanism would be needed, and the discussion started on the ESM.   At the same time, there was a clear understanding that these types of support measures for countries in difficulty needed to be complemented by measures to promote more sustainable public finances.  The six pack is the new set of rules on enhanced EU economic governance which entered into force on 13 December 2011. The Six-Pack has four main aims:

  • To strengthen the rules of the Stability and Growth Pact (SGP) which was designed to limit budget deficits and government debts, by introducing a much greater and stronger degree of surveillance at an early stage and to make it easier to initiate the excessive deficit procedure. The new rules will also give a greater importance to debt (and not only deficit) reduction and sustainable growth,
  • To introduce new controls on macro-economic imbalances across the EU, such as housing bubbles and growing divergences in competitiveness between Member States,
  • To set standards to ensure the correct and independent compilation of statistics as this data is crucial to sound budgetary policy-making and monitoring of budgets, and
  • To enhance the transparency of the decision-making processes and the accountability of decision-makers.

So it will be clear that the direction in Europe was always towards providing support to deal with countries in difficulty but also to put in place measures to ensure that this would not happen again.

It is important to recognise that we are in uncharted waters here.  That is why the approach is being adapted as it develops.  I have been pointing out for some time that when the Euro was put in place – the architecture to support it was not adequate.  I stated clearly some of the elements that were required – lower interest rates for the programme countries and a substantial firewall among them.  These, and other proposals I have made, have gained traction in Europe and are now part of mainstream thinking.

This resulted in some amendment to the interest rates for the programmes in March 2011.

At the same time, the discussions on the ESM continued and in early July 2011, Finance Ministers signed the Treaty as it then stood.

However, in parallel with this discussion, it became increasingly clear that the existing mechanisms needed to be greatly enhanced.  This culminated in the decisions of the Euro Area Heads of State and Government on 21 July 2011 which agreed significant changes for the Greek Loan Facility and more importantly for the broader European Agenda to – the EFSF.   Most notable among these was reduction in the interest rates and the other costs associated with the EFSF, and the change in its structure, while the maturities were lengthened.  All of these measures aimed to enhance debt sustainability in Programme countries.  In addition, the EFSF was also granted additional flexibilities allowing it to act on the basis of a precautionary programme, finance recapitalisation of financial institutions through loans to Governments and intervene in primary and secondary sovereign bond markets on the basis of ECB analysis.

It was agreed at the same time that these flexibilities would also be included in the ESM.

In order to do that, there was a need to reconsider the draft ESM Treaty.  These additional flexibilities, and the establishment of a permanent support mechanism, are clearly in our interest, and the reopening of the ESM discussions clearly brought potential benefits for us.

While that was taking place, discussions continued on the 2nd Greek Programme involving substantial additional funding and also private sector involvement which is strictly limited to Greece.  We have discussed those measures recently when we considered the legislation on the 2nd amendment to the Greek loan facility.

Of course, thinking was developing as to how to further underpin the EU’s support programmes.   The outcome was that, as part of the agreement to these broader measures, discussion started on a broader fiscal compact, with the aim of ensuring that the level of fiscal irresponsibility which brought about the current crisis could not be repeated.  This represents a development of the approach underlying the six pack, in the same way that the enhancement to the EFSF and the ESM represented a significant and important development in the approach to support mechanisms.

I should also point out that the measures in the fiscal arena have been complemented by the actions of the ECB.  The low interest rates currently in place will help to offset the economic slowdown which is affecting not just Europe but also the world economy.  In addition, the ECB’s longer term refinancing operation or LTRO, has provided some €1 trillion in liquidity to the European Banking system.

Looking now to our own position. We are in receipt of substantial support from the EU mechanisms under our EU-IMF programme of financial support.  This provides funding at rates well below those which would be available if we had to fund ourselves in the financial markets.  In addition, the ECB continues to provide substantial liquidity support to the Irish banking system.  It should therefore be clear that European solidarity is in our interests and to our benefit.

Our Programme is working;  we have met all our targets to date – over 90 in all.  We have met the quantitative fiscal targets.  We have implemented financial sector restructuring.  We achieved banking recapitalisation at a significantly lower cost than initially envisaged.  We imposed burden sharing on junior debt holders.  We are implementing structural reforms with a view to enhancing the growth potential of the economy.  We are introducing fiscal reforms to improve the management and control of our public finances.

The success of our programme implementation has been recognised by the financial markets.  Our 10 year bond yields have remained below 7% for a number of weeks now.  In addition, the NTMA has successfully re-engaged with the markets through the recent bond swap.  These are all positive indications.  They reflect our resolve to emerge successfully from our programme at the end of 2013, and to resume financing ourselves in the financial markets.

It is in Ireland’s, and in Europe’s interest, that there should be a strong firewall, or safety net available to all Euro Area Member states.  I have argued for this consistently.  The ESM provides this firewall.  It provides reassurance to the financial markets, and to all of us, thereby underpinning the confidence that is essential to healthy economic activity. It will also help to protect Euro Area Member States who are in economic difficulty from market speculation.

Now turning to the content of the ESM Treaty, there is no basis for the assertions made in the private members motion in relation to the inclusion of the cross reference to each other in the ESM and Stability Treaties.

The linkage between the ESM and the ratification of the Stability Treaty was accepted in the context of the acceleration into force of the ESM by July 2012. It was of particular importance to a number of countries. It is entirely logical and reasonable that a country receiving the support of its partners under the ESM should be prepared to run sensible budgetary policies as required under the new Treaty. That is the position, and the attempt to put any other gloss on it is both inaccurate and misleading.

Further I have clarified that the linkage of both the ESM Treaty and the Stability Treaty refers to new applications for assistance under the ESM and will not affect the transfer to the ESM of undisbursed amounts under the European Financial Stability Facility (EFSF) for Ireland and other programme countries. The funding approved under the existing Programme of Financial Support for Ireland is not therefore conditional on Ireland ratifying the fiscal compact but, as is currently the case, on Ireland successfully implementing our programme.

The ESM treaty will have to be ratified by the 17 Euro Area member states; it will enter into force and the ESM will become operational as soon as possible. The target date is July 2012, a year earlier than originally planned. As a permanent mechanism, the ESM will take over the tasks currently fulfilled by the European Financial Stability Facility and the European Financial Stabilisation Mechanism.  The ESM’s lending capacity is currently set at €500 billion, and this will be subject to reassessment later this month. This again reflects the continuing development of EU policy to which I referred earlier.

Sinn Fein tabled a motion to try to cast the Government’s actions in a bad light. The Government has consistently acted to support the financial stability of both Ireland and the Euro Area. We have contributed constructively to efforts at European level to ensure the economic stability of the Euro Area, the financial stability of the European Union and the safeguarding of the financial stability of the Euro Area as a whole. While the underlying economic and fiscal situations differ across Europe, it is imperative that countries restore their respective economies to health and their public finances to a sustainable position.

In relation to the legislation, as our amendment to tonight’s motion makes clear, the decision on the timing of legislation for the ESM Treaty, and also for the Article 136 amendment has yet to be taken.  However, it is clear that we will bring forward this legislation at the appropriate time.  This will have regard to the target date for entry into force of the ESM Treaty on 1 July.

The motion before the house tonight seeks to sow confusion and doubt where none should exist.  The Government’s amendment places the ESM in its proper positive context of a series of developing EU measures to address the current crisis, and to seek to avoid a future repetition.  The Government has played a constructive role in these discussions.

I commend the Government’s amendment to the House.

Exchange on Promissory Notes with an AAA-Rated Correspondent

This weekend, I received an email from an economist from a Triple AAA-rated Euro zone country in response to the briefing paper that I provided to the Oireachtas Finance committee. This person wished to keep their correspondence confidential so I’m not going to repeat their email. However, I think it might be useful to outline the nature of the exchange I had with them and to provide my response in public. While I don’t think this issue comes down to technical considerations, the exchange does shed some light on some of the technical matters likely being discussed behind the scenes.

My correspondent put forward a number of arguments.

  1. That Article 18.1 of the statute governing the ECB and Eurosystem says that lending from national central banks must be based on “adequate collateral” and that this applies to all lending, including ELA. They argued that the Eurosystem’s principles of collateral and haircuts should be considered “sacred”.
  2. That this means that the yield to maturity on promissory notes must be the same as the yield on marketable Irish government bonds, so any restructuring of the notes to reduce payments now must result in even higher payments later and this cannot help reduce Ireland’s debt burden.
  3. That publicly appealing to change the structure of the promissory notes amounted to the Irish government lobbying the ECB Governing Council to change its collateral policy, which undermined the Council’s independence, an issue which its members feel very strongly about.

In summary, my correspondent argued that a restructuring of the note that reduced Ireland’s debt burden was impossible and the Irish government arguing for such a restructuring would simply generate bad will among our European partners. The correspondent concluded by noting that they had nothing against the idea of some kind of deal aimed at reducing Ireland’s debt burden and made a brief reference to senior bank debt.

Here’s my response:

Dear X

I understand your arguments but I think this issue needs to be discussed in light of other recent events in the Eurosystem in recent months.

You may consider the practices of collateral valuation and haircuts to be sacred but you know that there has been a considerable shift in collateral policies over the past few years.  It’s a complicated crisis and lots of things previously considered unthinkable have happened.

You’re right that the Treaty mentions “adequate collateral” but it does not specify the meaning of “adequate”.  As I explained in my paper, it is my opinion that the letters of comfort and facility deeds provided to the Central Bank make the promissory notes different assets (more safe) than normal sovereign bonds which do not come with such assurances, so I don’t necessarily agree that they need to be valued in line with current Irish private bond rates.

You probably disagree with that argument but ultimately this is a judgment call for the Governing Council to make.  And now, with the GC having authorised €1 trillion in long-term loans, much of it against previously ineligible collateral, raising the question of a reworking of the collateral on a mere €28 billion is hardly unreasonable.

Even if you are right that the notes need to be valued using the current private bond rate, there is still some gain from a payment structure that backloads the repayments.  This would reduce the cash flow burden at a very sensitive time with Ireland attempting to return to the market to finance deficits and repay debts.  In addition, delaying payments on the note to a time when underlying fiscal retrenchment is over will allow for a smoother path of fiscal adjustment. (To understand the extent of adjustment so far in Ireland, I recommend page 20 of this PDF file of a Commission report on Ireland

I’d note that in recommending delaying payment on the notes, I am not recommending that ELA repayments cease. The IBRC is selling assets and taking in reasonably large quantities of loan payments. It has sufficient assets to repay much of the ELA over the next few years even if there were no promissory note payments over that period.

In relation to independence, I know how the Governing Council works and have always made clear to people in Ireland that any changes to the notes would need to be discussed among Eurosystem staff and then brought to the Council to be considered. This is not a matter of politicians lobbying for the notes to be changed and I would note that the Irish government have been extraordinarily low key in their approach to this issue, hardly ever mentioning the Governing Council. The discussions which are taking place are at a bureaucratic non-political level, though I don’t believe they are making any progress towards getting the notes changed.

Anyway, thank you for taking the time to engage on this issue. I will do my best to be clearer about the issues relating to collateral quality and ECB independence in future. It’s also good to hear you are not against lightening the debt burden for Ireland, though I would note that there is very little IBRC senior debt left (less than €1 billion) and it’s not really possible to consider restructuring the debt of the other banks which have now been recapitalised. So I think a reworking of the notes would be beneficial.

Regards and thanks,


ECB Governing Council Discussions

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.