Ireland's government rushed through emergency legislation early on Thursday to liquidate the failed Anglo Irish Bank as it tries to secure a deal with the European Central Bank to ease the country's debt burden.
Prime Minister Enda Kenny has staked his administration's reputation on cutting the cost of bailing out Anglo Irish, now known as Irish Bank Resolution Corp, or IBRC, and the ECB's governing council in Frankfurt is considering a fresh proposal after a previous plan was rejected last month.
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"This closes a sad and tragic chapter in our economic history," Kenny told a special session of the lower house that stretched until 3 a.m.
Technical negotiations between the ECB and Irish officials have dragged on for 18 months, with Frankfurt conscious that any proposal offered to Dublin could possibly set a precedent for other countries, such as Spain, dealing with large bank debts.
But European leaders also need a success story to emerge from the region's crisis, and a rescheduling of the so-called promissory notes or IOUs given to IBRC could help Ireland exit its EU-IMF bailout on schedule this year.
Under Dublin's new plan, first reported by Reuters on Wednesday, IBRC's liquidation was necessary so that the Irish government no longer had to make 3.1 billion euros of annual payments on the promissory notes stretching out until 2023. The next payment was due next month.
The government had originally hoped to unveil the liquidation of the former Anglo Irish in conjunction with a deal from the ECB, but the Reuters report meant Dublin had to immediately legislate for its demise.
Finance Minister Michael Noonan told parliament the government could not deny the report and therefore risked destabilising the bank's position.
"I would have preferred to be introducing this bill in tandem with a finalised agreement with the European Central Bank," Noonan said. "But we had to move."
Noonan said the ECB would consider Ireland's proposal at its monthly meeting later on Thursday.
Opposition lawmakers, angered at the short time they had to digest the highly technical 58-page bill, complained that they did not yet know what, if anything, would be agreed with Frankfurt.
"We cannot vote for this if we don't know the other part of the package," said opposition lawmaker Shane Ross.
But Kenny's large majority prevailed and the lower chamber voted in favour of the bill by 113-36.
People on social media website Twitter dubbed the session #promnight, a play on words on Anglo's infamous promissory notes, and one user said the late night meant lawmakers finally had a legitimate reason to be asleep in parliament.
President Michael D. Higgins will sign the bill into law later on Thursday. He cut short a state trip to Rome to ensure he could consider it.
Anglo Irish and its casino-style lending were at the heart of Ireland's financial crisis. The bank's near collapse in 2008 pressured the government into guaranteeing the entire financial sector, sucking it into a downward spiral and in late 2010, a 67.5 billion euros EU-IMF bailout.
Three of the bank's former executives, including its former CEO, will go on trial next year on fraud charges.
Under Dublin's plan, the 28 billion euros in promissory notes will be replaced with long-term government bonds, meaning that Ireland can make more gradual repayments, a source familiar with the discussions told Reuters.
Anglo Irish's assets, of between 12 billion and 14 billion euros, will be transferred to the state-run bad bank, the National Asset Management Agency, or NAMA, which will pay for them by issuing its own state-backed bonds, a source familiar with the situation said.
Accountancy firm KPMG was appointed as liquidator.
"The board has no further function, the functions of the board are being taken over by KPMG," Alan Dukes, a former finance minister and the current chairman of IBRC, told Reuters.
Dukes and the IBRC board were only informed about the liquidation plan on Wednesday, according to sources familiar with the matter, while remaining staff members were told via email.
IBRC, which was due to be gradually wound down by 2020, employs about 775 people. Their contracts were terminated, as is usual in a liquidation, but Noonan said he expected KPMG would rehire most of them to help wind down the bank.
The ECB rejected Dublin's preferred solution of rescheduling part of its bank bailout bill when its board discussed the plan for the first time last month, EU sources familiar with the talks said.
If the ECB signs off for the plan, most of IBRC's balance sheet will pass to Ireland's central bank when the scandal-hit bank is liquidated, a source told Reuters.
Under its original plan, Ireland wanted the Irish central bank to hold a long-term bond for a minimum of 15 years. The ECB's Governing Council warned that such a long holding period would effectively be "monetary financing", which is prohibited by EU treaty.
The 15-year clause is now being dropped, a second source said.
Opposition lawmakers told Kenny he had failed to cancel the Anglo burden.
"You are winding up the bank but you are not winding up the debt and that's where you critically failed," Pearse Doherty, finance spokesman for the Sinn Fein party, told parliament.