Ireland to 'stick by' bank pledge
Minister for Finance Michael Noonan has said that Ireland is “sticking by the commitments made on 29th June” ahead of a meeting of euro-group finance ministers this evening in Brussels.
At a European Summit on June 29th last, it was agreed to break the link between sovereign and bank debt.
Speaking to reporters ahead of the meeting, Mr Noonan acknowledged that there was "a variety of views” regarding the workings of the ESM among member states.
“There are a variety of views but we’re sticking by the commitments made on the June 29th", he said.
“We’ll be arguing what we understood the situation of the 29th of June. Banks that were still functioning - lending trading banks - would be eligible even though insolvent banks on wind downs mightn’t be," he said.
There are divisions among euro zone countries about the funds application to Ireland's previously recapitalised banks.
Finance ministers from the countries which share the single currency are set to discuss the workings of the euro zone’s new permanent bailout fund, the ESM this evening.
Ireland is hoping that AIB and Bank of Ireland will be eligible for recapitalisation from the fund, though the issue of retrospective capitalisation is a contentious one.
The discussions surrounding the ESM are separate to the government’s negotiations with the European Central Bank about recasting of the promissory notes it used to recapitalise Anglo Irish Bank.
The appointment of a new chair of the euro group is also expected to be announced today. Dutch finance minister Jeroen Dijsselbloem is widely expected to succeed Jean-Claude Juncker, who has held the position since 2005.
Twenty Government ministers will travel to Brussels over the next three days to present to European Parliament committees as part of the Irish presidency of the European Council.
They will deliver 27 presentations to the various European Parliament committees outlining Ireland’s priorities for the presidency.
Since the Lisbon Treaty, the European Parliament has gained additional co-decisionmaking powers. Hence gaining support from the parliament is a key function of Ireland’s presidency of the European Council as it strives to progress various pieces of legislation.
Minister for Transport, Tourism and Sport Leo Varadkar will be the first when he presents to the European Parliament committee on transport at 4pm today. Tomorrow and Wednesday there will be a full schedule of presentations.
They include Minister for Finance Michael Noonan’s presentation to the parliamentary committee on economic and financial affairs tomorrow with Minister of State at the Department of Finance Brian Hayes in the Irish chair. European Parliament committees are composed of MEPs from across the political spectrum.
With officials declaring the worst of the region's three-year market emergency over, finance ministers are debating whether the ESM should take over earlier bank bailouts that were routed through governments and what to do with so-called legacy assets.
A European Union aide who briefed reporters defined those as loans already on a bank's balance sheet that could cause problems in the future.
"It's really about signalling," said Nicolas Veron, senior economist at the Brussels-based Bruegel research group.
"The only thing that really has an impact on markets is when the word unlimited is uttered by somebody in charge, so in the end it's not a question of how high the big number should be."
The actual amount of ESM funds available for direct aid to banks may be less than €100 billion because the fund needs to fulfil its main mission of lending to governments that lose market access, Mr Veron said.
Bank aid may also require additional set-asides for the ESM to maintain a high credit rating.
Borrowing costs in bailed-out and debt-laden euro nations have plummeted since the European Central Bank pledged to commit to backing their bond markets.
Spain's 10-year yield has declined more than 200 basis points. The cost of insuring Ireland against default has dropped 84 per cent since July 2011. Creditor nations such as Germany, the Netherlands and Finland have sought to limit the ESM's availability to nations struggling to shore up their financial sectors.
Finnish prime minister Jyrki Katainen said last week that bank shareholders and bondholders should bear the brunt of future rescues, bringing in taxpayer money to clean up troubled financial businesses only as a last resort.
Ministers also face whether to convert past bank bailouts such as those they routed through the Spanish, Irish and Greek governments.