FRANKFURT, Feb 7 (Reuters) - Ireland's deal to cut its debt burden does not set a precedent for other struggling countries, Irish central bank chief Patrick Honohan said on Thursday.
Ireland struck a long-awaited deal on Thursday to ease the burden of debts it took on to rescue its banking system in a way that will cut its budget deficit and borrowing needs and put it on track to end its reliance on EU-IMF loans this year.
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.
Asked by journalists on the sidelines of a conference whether Ireland's deal set a precedent, Honohan said: 'I don't think so. It is a very special case.'
Under the terms of the deal, first reported by Reuters on Wednesday, Anglo's promissory notes with an average maturity of between seven and eight years will be exchanged for government bonds with an average maturity of over 34 years. The first principal repayment will be made in 2038 and the last in 2053.
The Irish government rushed through emergency laws to liquidate Anglo Irish in the early hours of Thursday morning, the first part of a plan to avoid having to keep paying 3.1 billion euros annually on the Anglo Irish promissory notes.
Honohan said the central bank would sell the bonds later, subject to market stability.
'Following the liquidation ... the central bank of Ireland would have ended up with a promissory note, which is a non-tradable instrument, very non-standard,' Honohan said.
'Instead as a result of this transaction, we end up with bonds of a conventional type, which are tradeable, which are priced at current market yields, to have equal market value to the stream of payments in the promissory note. So we are ahead. The central bank gains. Does that means the government loses? No,' Honohan said.
(Reporting By Eva Kuehnen and Sakari Suoninen) Keywords: ECB/HONOHAN
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