Deal on Irish legacy bank debt unlikely - Barroso
European Commission president says State’s banking sector created problems not the EU
European Commission president Jose Manuel Barroso (L) and European Council president Herman Van Rompuy address a news conference during a European Union leaders summit in Brussels this morning. Photograph: Laurent Dubrule/Reuters.
Asked whether Ireland should be entitled to retroactive debt relief, Mr Barroso said the problems that appeared in Ireland were not created by the European Union.
“In fact it was the Irish banks that created a big problem for Ireland but also the other countries in the euro area. This should be taken into consideration,” he said at the end of the first day of a two-day summit of EU leaders.
Mr Barroso said that the “major destabilisation of the euro area” which had resulted from events in the Irish banking sector “happened under the responsibility of the national authorities of Ireland and the national supervisory entities.”
“It would be wrong to give the impression that Europe has created a problem for Ireland and now Europe has to help Ireland,” he said.
“In fact it was the banking sector in Ireland, that was one of the biggest problems in the world in terms of banking stability, let’s be honest about this.”
While praising the efforts of the Irish people, he stressed that the problems in the Irish financial sector were not the fault of Europe.
“The euro was not the problem [for] Ireland, the euro was a victim of the problems created by some practices, irresponsible practices, in the financial sector in Ireland,” he said, noting that in some countries problems were due to the fact that some countries “did not observe the minimum prudence in terms of managing their banking or financial sector.”
His comments came as European leaders signed off on a key aspect of banking union – a single, centralised authority which will have the power to close down or restructure a bank.
Underpinning the new banking rules is a law that allows the “bail-in” of depositors, including senior bondholders and deposits of over €100,000 in certain cases, in a bid to avoid tax-payer bailouts of banks in the future.
The burning of bondholders was ruled out during the bail-out of Irish banks. On Wednesday night, following a string of emergency meetings, finance ministers on a new resolution authority to wind –down problem banks.
The Single Resolution Mechanism – the second pillar of the European Union’s plan for a banking union — was agreed a year after EU leaders agreed the first phase of banking integration, a single supervisor for European banks.
EU Commissioner Michel Barnier said the new authority will “break the vicious circle uniting banks and their sovereigns.”
Under the proposal, which will now be debated with the European Parliament, a resolution board will decide on how to handle troubled banks, at the behest of the European Central Bank which takes over supervisory responsibility for European banks by the end of next year.
The board will comprise representatives of member states, rather than simply the European Commission as had been suggested by Brussels and opposed by Germany.
Minister of State for European Affairs Paschal Donohoe said this morning that the Government remained determined to do all it could to recoup taxpayer’s money injected into the banks.
He agreed with Mr Barroso’s assertion that the principle cause of the banking collapse was an inability in the State to properly regulate the banking sector.
Mr Donohoe told RTÉ’s Morning Ireland that the decisions being taken on banking union in Brussels this week were not central to Ireland’s case for a legacy debt deal.
Discussions on the European Stability Mechanism next month and a subsequent Eurogroup finance ministers meeting would have more on a bearing on the Irish case, he said.