The Irish family connections of Canada’s prime minister-elect have been well publicised. But less well known is the role Mark Carney played in saving the Irish taxpayers potentially billions by advising the Irish government on how to deal with its banking debt.
In early 2012 Mr Carney, then governor of the Central Bank of Canada, met then finance minister Michael Noonan at an informal meeting at the World Economic Forum in Davos.
Mr Noonan forged a strong bond with the Canadian banker because of his Irish heritage. Three of his grandparents were from Ireland – two from Mayo and one from Cavan. He had also held an Irish passport since the late 1980s.
Ray Bassett, former Irish ambassador to Canada, recalled on Monday how Mr Carney had suggested the alternative to the infamous €25 billion Anglo Irish Bank promissory notes – agreed with the Troika of international lenders, the ECB, the EU and the IMF – which were then costing the State a crippling €3.1 billion a year.
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Mr Carney suggested they be replaced with long-term government bonds, paid over 25 to 40 years at a much lower interest rate, according to Mr Bassett.
Mr Bassett, based in Ottawa at the time, said Mr Noonan subsequently told him how Mr Carney, a former Goldman Sachs banker, had essentially made a “back of the envelope calculation” to show how it could be done.
Mr Carney was said to have taken a notebook and pen from his bag and sketched out the idea in two sentences.
When Mr Noonan submitted the alternative repayment scheme to the European Central Bank it was initially opposed by Germany and Finland. However, the suggestion made by Mr Carney was eventually accepted by the German Bundesbank, which abstained in the vote.
“What it did was it gave Ireland an opportunity of escaping quickly from the burden,” said Mr Bassett.
His account was confirmed by a second source with knowledge of the discussions.
“Mark Carney was not a hail-fellow-well-met person at all. He was quiet and efficient but he was pretty much on our side. He was the rock star of international banking at the time as his policies as head of their central bank had seen Canada escape the financial crisis,” Mr Bassett added.
On Monday Mr Noonan said Mr Carney had been very helpful and a good friend to Ireland during that time. “He is a man of outstanding ability. Canada, in its current crisis, is very lucky to have such a gifted prime minister coming into office.”
Shortly after that, in late 2012, Mr Carney was announced as governor of the Bank of England, a position he held until 2020.
In 2013, when the ECB agreed to allow the bond scheme, Mr Noonan said its long-term nature, and the lower interest rates, would lead to considerable savings on the interest bill for the promissory notes, then estimated to be €17 billion.
As it happened the bonds, with a value of €25 billion, were all purchased by the NTMA on behalf of the State within a decade because interest rates had fallen to near zero. In an information note in 2023 the CSO said the premium (interest) paid for the total debt was just short of €13 billion.
Karl Whelan, professor of economics in UCD, said the promissory note and bond arrangements were very complicated and few understood them. In an email response to a query he said one benefit of the bond arrangement was it did give the government flexibility in deciding on the length of time to repay the debt.
