A lot of people are saying this. Apparently the capital repayment element of the €3.1 billion payment is treated as part of our current budget deficit. I don't understand why this would be. But it has really no impact on our total borrowing.
My understanding is that the capital element of the PNs i.e. 30Bn, or whatever, was recognised in the 2010 deficit. So each year the capital element of the 3.1bn is ignored in the budgetary arithmetic (already counted in 2010) but the interest element of c.1.9bn is new deficit. In this sense the rate of interest on the PNs is relevant.
But Seamus Coffey has got it absolutely spot on. This easing of the budgetary arithmetic will not affect one iota the fiscal demands placed on us by the Troika or indeed by the markets if we ever re-enter - there is no relaxation here for our fiscal consolidation requirements. The Government, and Labour in particular, should be careful not to overplay this "victory", for the 2014 budget is still going to be every bit as difficult as the 2013 one was.
Indeed if this in any way gets the Croke Park Beardies to argue that there is now scope to ease off the austerity pedal, the government has shot itself in the foot.
So is it a win at all? Well, it does amount to long term monetary financing (the ECB's great ideological no-no) and monetary financing is traditionally much cheaper than long bond borrowing - currently 0.75% versus 4%. Under the PNs we were required to quite rapidly ease off the monetary teat, now we can enjoy it for 35 years
Another very obvious benefit is sheer cashflow. That 3.1bn had to be raised, now we only need to raise 0.7bn. That makes it easier to re-enter the market, which is I presume the main reason that the IMF were in support and the ECB has reluctantly conceded.
Finally, for the Fierce Doherty's of this world, we have crossed a Rubicon. In the words of Charlie Haughey we have copperfastened this obligation. The PNs were always a bit dodgy and walking away from them might have got some sympathy from our EU colleagues. There is no walking away from Government Bonds without bringing the house down.