This country is crawling with well-paid economists and financial analysts. Yet not one has produced a financial analysis of the Promissory Note deal so far. The vacuum is being filled with financially illiterate guff and bluster "it's like a mortgage", "inflation will wipe it out", "handing debts to your children" etc.
Why the delay? The details of the deal have been available since yesterday. Promissory Notes/Technical Briefing - Department of Finance - Government of Ireland.
The reason for the delay may be that this is, in effect a derivatives deal. Let's call it a Noonan Swap. Many economic commentators, normally so vocal, are probably out of their depth. They don't know how to price a Noonan Swap which is a derivative in the same sense as an interest rate swap, only more complicated.
The cashflows associated with the Prom Note were penal but certain. We knew exactly what they would be. By design, the initial NPV of the new bonds is identical to that the PN. This allows the PN to be bought back at fair value.
As time goes on, however, the cashflows associated with the new deal become increasingly uncertain. The effective interest associated with the deal starts out as ECB refi rate (which is attractive). But the ecb rate is uncertain and more likely to increase. Also, the bonds have to be sold onto the open market on a pre-determined schedule. This means that the cost crosses over to become long-term Irish bond yields. We don't know where those yields will be. For example, they would be higher in an inflationary environment. Inflation increases the financing cost to the state. ICB even has an option to convert to fixed rate bonds. We don't know how this option might be exercised, but this also affects the eventual cost.
Derivatives deals start out benign. However over time, if left unhedged, their valuation can move drastically.
Noonan's swap starts out with low interest payments. However, the net value of the swap will change radically. In other words, while it is initially cheaper to finance than the PN structure, it is much riskier in the long term. Noonan's Swap may make money relative to the PN, as claimed. Or it may lose money. Depends.
Of course, the goal of this structure was simply to reduce payments over the short-term. That was the only objective. In a sense, they had no choice. The Greek government was doing something like that in 2001 when it entered large cross-currency swaps agreements. Those didn't work out too well.
Let's hope that the Irish government has been well-advised. Looking forward to seeing some analysis from the army of economists who live off the public purse.