Landmark Deal On Bank Debt For Irish Government

The Irish government has reached an agreement with the European Central Bank to restructure over €31bn of debt relating to the former Anglo Irish Bank.

The deal, which has been the subject of intense negotiations for over six months, has the potential to reduce Ireland's borrowing costs by €20bn over the next decade.

It will also mean €1bn in savings on interest repayments - which means the government will not have to achieve that amount in cutbacks and tax increases over the next two years.

Under the deal, the former Anglo Irish Bank is liquidated and its assets sold or transferred to NAMA.

Debts owed on Anglo promissory notes are replaced with State-backed bonds with with the first maturing in 2038 and the last in 2053.

The Dail sat through the night last Wednesday to pass emergency legislation that facilitated the deal.

"Today's outcome is an historic step on the road to economic recovery," Taoiseach Enda Kenny said. "It secures the future financial position of the state."

Critics of the deal said it did not go far enough, as they had hoped for a write down of some of the massive debt.

"This week my youngest son began to crawl. He wasn't even born at the time the promissory note was issued, yet he'll be 40 years of age and this state will be paying back the toxic debts of Anglo Irish Bank," Sinn Fein's Pearse Doherty told the Dail.

But Finance Minister Michael Noonan said that was never a realistic option.

"We always said that we were not looking for any write downs. Anybody who knows the European situation knows that the ECB does not do write downs," he said.

The yield on Irish bonds fell to its lowest rate in almost six years on foot of the deal.