Noonan downplays prospect of early deal on bank debt
“The evening of the Helsinki statement, the Dutch authorities put out a statement saying that what they meant by ‘legacy’ was banks that had become insolvent and were no longer functioning as banks but that functioning banks would not be caught in their definition of legacy,” he said.
“So in terms of applying that formula to Ireland they were excluding Anglo Irish Bank, but were including AIB and Bank of Ireland.”
Ireland is seeking European Union help to refinance €30 billion of promissory notes. It is also looking for EU aid in refinancing other bank debt.
Separately, Euro zone finance ministers delivered a united defence of Spain ahead of the meeting, saying the country was taking steps to overhaul its economy, funding itself successfully in the financial markets and did not need a bailout, at least for now.
Arriving at the Luxembourg meeting to discuss Greece and Spain and to inaugurate the euro zone's permanent bailout mechanism, the ESM, German finance minister Wolfgang Schaeuble said Madrid had made clear it wanted no help.
"Spain needs no aid programme. Spain is doing everything necessary, in fiscal policy, in structural reforms," he told reporters as he arrived for a gathering that will also discuss plans to establish a single supervisor for euro zone banks.
"Spain has a problem with its banks as a consequence of the real estate bubble of the past years," he said. "That's why Spain is getting (EU) help with banking recapitalisation."
Luxembourg finance minister Luc Frieden took the same line but added that if Spain were to make a request for aid beyond the 100 billion euros already earmarked to recapitalise its banks, it would be examined.
"I think we should deal with such a request when it comes, but so far the Spanish government is undertaking reforms which go in the right direction," he said.
Finance ministers agreed in June to provide up to €100 billion for Spain's banks, many of which are weighed down with bad property loans and need to be recapitalised.
An independent audit has shown the banks need around €40 billion, less than originally expected, a result Austria's finance minister, Maria Fekter, said was positive.
"We have the banking application from Spain," Ms Fekter said. "We are likely to hear today that this 100 billion euros is not all needed, that Spain needs significantly less." Many in the financial markets are convinced Spain will not be able to meet its sovereign funding needs at an affordable cost without euro zone and European Central Bank support, especially with several of its regions requiring a bailout from Madrid.
A euro zone source said ministers may also discuss Spain's 2013 budget, outlined last month, which the International Monetary Fund and the European Commission both believe is based on an over-optimistic forecast of a 0.5 per cent economic contraction next year.