IMF Urges Europe To Give Ireland A Deal On Bank Debt

As one third of the "troika" of bodies which is funding Ireland's rescue package, the International Monetary Fund is a significant voice on the Irish economy.

And now the Washington-based fun has backed attempts by the Irish government to secure a deal on the Anglo promissory notes which cost Ireland in excess of €3bn every year.

The Government has been seeking to restructure about €30 billion of promissory notes it used to rescue the former Anglo Irish Bank, now known as Irish Bank Resolution Corporation.

IMF mission chief for Ireland Craig Beaumont said there was no firm timetable for the release of a technical paper on the Anglo Irish promissory note issue, but he would like to move the process ahead at a "reasonable pace".

Approving the latest disbursement of €1.4bn to Ireland under the bailout program, the IMF praised Ireland's efforts to get its economy back on track.

And it said it was now external factors, rather than domestic ones, which was preventing Ireland from recovering more quickly.

"Ireland's policy implementation has continued to be steadfast and ownership of the program remains strong despite the considerable challenges the country is facing," the IMF said in a statement.

"However, as financial tensions in the euro area have resurfaced, Irish sovereign bond spreads have risen in recent months to exceed the level at the outset of the EU-IMF program".

The Irish government has been lobbying hard for a deal on the Anglo promissory notes, but the European Commission and European Central Bank have shown little willingness to restructure the bank debt.

The government would like the debt to at least be spread over a longer time frame to make it more manageable and to reduce its impact on sovereign bond yields in the short to medium term.

The IMF has always been supportive, but its latest strong backing for the initiative could be significant.

"Tackling the issues remaining from Ireland's deep banking crisis in a proactive manner has become critical, and such efforts would be most effective as part of a broader European plan to stabilize the euro area," the IMF report said.

"Extending the term of the promissory notes and the associated Eurosystem funding, and placing banks' legacy assets in a vehicle that does not rely on market funding, would much enhance the prospects ... for the Irish sovereign to return to the market".