German scepticism on debt deal grows


German politicians have drawn a line through Irish hopes of extending EU loan repayments by up to 15 years.

Norbert Barthle, a political confidante of Chancellor Angela Merkel, warned that such a debt concession would “undermine the credibility” of Ireland’s EU-ECB-IMF programme and was unlikely to find support in Berlin.

“A considerable extension of the average loan period would send the wrong signal, particularly as Ireland only recently experienced relief though the restructuring of debt notes,” said Mr Barthle, budgetary spokesman for the ruling Christian Democrats.

Bailout terms

Earlier this week, EU finance ministers agreed in principle to look at extending the maturity of bailout loans to Ireland and Portugal. The European Commission, the European Central Bank and the International Monetary Fund will prepare a report and finance ministers will discuss the proposal next month.

A federal finance ministry spokesperson said Berlin would “examine proposals when they are available and then decide”.

Any adjustment to the terms of EU-ECB-IMF loans to Ireland require the agreement of all EU member states and Mr Barthle said he “could not imagine that the Bundestag would agree” to anything drastic.

“Smaller retuning efforts, such as easing the repayment profile, could be sensible to ease countries’ return to financial markets,” he said.

German resistance

A month after agreement to recast Ireland’s promissory notes, resistance is growing in Germany to any more bailout adjustments for Ireland.

Few understand the technical detail of the promissory note deal but, in financial and media circles, there is a widespread view that the agreement broke ECB rules.

“Through this questionable manoeuvre,” thundered public broadcaster ARD this week, “there is now no separation between fiscal and monetary policy.”

Seven months before federal elections, German MPs from all parties are wary of having to face voters after being seen to have waved through further concessions to Ireland or any other programme country.

Behind the caution towards Ireland’s request is a concern, across party lines, that Portugal will demand similar loan adjustments. “This me-too effect is dangerous because, when you start with concessions to Ireland, you soon face demands from Italy,” said one senior government source.