Barroso changes tack on Irish banking debt

Outgoing European Commission president to speak about Ireland in UCC tonight

Taoiseach Enda Kenny and European Commission president Jose Manuel Barroso. Photo: Alan Betson /The Irish Times

Taoiseach Enda Kenny and European Commission president Jose Manuel Barroso. Photo: Alan Betson /The Irish Times

Wed, Mar 5, 2014, 11:16

It’s just over two months since Jose Manuel Barroso stoked controversy when he said that the euro was a victim of the Irish banking crisis at a leaders’ summit in Brussels, just as Ireland had exited its bailout.

This evening he will have the first opportunity to return to the topic of Ireland when he addresses an audience at University College Cork.

Most significantly, the outgoing European Commission president will say that the “spirit” as well as letter of the infamous June 2012 agreement should be fully respected, which pledged to break the link between banking and sovereign debt and specifically referred to Ireland’s special case.

This statement puts him directly at odds with his suggestion in December (though not explicitly said) that Ireland is unlikely to get further retroactive debt relief for its banks.

Though the impact of an outgoing Commission president’s views on euro zone policy is questionable - the European People’s Party (EPP) meet tomorrow and Friday in Dublin to select its candidate to succeed Barroso later this year - it nonetheless shows an attempt on the part of the European Commission to show it is “on the side of Ireland” to use Barroso’s words, despite strong resistance from Germany, Finland and the Netherlands for further debt relief.

The speech will be an attempt to defuse the tensions between Brussels and Dublin that emerged at the time of the bailout-exit. The head of the European Commission will be treading a delicate line between praising Irish people’s “courage and resilience” during the bailout, and reminding Irish people of the support provided by the European Union, for example the extension of loan maturities and the promissory note deal.

Ultimately, that is not enough for many Irish people who believe that the decision to bail-out ‘bondholders’ put an unfair and unwarranted burden on the country, particularly in light of the fact that European finance ministers are currently finalising plans to ‘bail-in’ bondholders and other creditors in future bank collapse. The shift in the policy of ‘bail-out’ to ‘bail-in’ comes too late for Ireland’s banking collapse it seems..

The decision to award Mr Barroso an honorary doctorate has also raised eyebrows from some European commentators, bemused at a decision to honour a figure who is representative of the European Commission’s policy of fiscal austerity.

Meanwhile in Brussels, attention is now turning to Mr Barroso’s home country of Portugal, which is due to exit its bailout in May.

There is a growing sense that the country may seek to return to private market funding without the use of a precautionary credit line, something that was considered untenable a few months ago.

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