Brian Cowen today shed some light on how Ireland is to pay down the IOUs incurred in bailing out Anglo Irish Bank and Irish Nationwide. In the Dáil, Cowen described the promissory notes as being akin to paying a mortgage.

The use of the term ‘mortgage’ by the Taoiseach confirms Labour’s view that these IOUs will generate large annual interest payments in the budget every year. This just makes it more challenging to meet the 3% deficit target by 2014 and will result in more tax hikes and spending cuts in the government’s four year plan.

To date, the Minister for Finance has issued €18.88bn in promissory notes to Anglo Irish Bank, with the issue of a further €6.4bn imminent. A promissory note has been issued to Irish Nationwide for €2.6bn, but the Minister has indicated that this will very soon increase by a further €2.7bn. A smaller promissory note, amounting to €0.25bn, has been issued to EBS.

These IOUs will total nearly €31bn by end 2010, but that’s not the end of the story.

If the interest rate on the promissory notes averaged 5%, and repayments totalled €3bn per annum, then the total interest charge could add more than €10bn to the final bill for bailing out the banks.

The Minister for Finance must come clean on the interest rate, the term, the annual cost and the total overall cost of paying off these IOUs.

We need to see the small print in the ‘mortgage agreement’ he has signed the country up to.