German officials say coalition discussions did not shape Irish bailout exit

Berlin has denied German domestic politics influenced Ireland's decision to exit its EU-International Monetary Fund programme without a financial safety net. On Thursday, Fianna Fáil finance spokesman Michael McGrath and John FitzGerald of the ESRI said the lack of a coalition in Berlin had meant the Bundestag was not in a position to back precautionary funding for Ireland.

A German government official dismissed this speculation yesterday as incorrect and misleading. “This was a purely Irish decision and we support and welcome that decision.”

In Ireland's position, Germany would have made the same decision: to take advantage of being fully funded until the end of 2014 to send a signal to markets that Ireland could stand without external assistance, he said.

Ongoing coalition negotiations in Berlin played no role in the decision, said officials from both chancellor Angela Merkel’s Christian Democrats (CDU) and its likely coalition partner, the Social Democratic Party (SPD).

SPD politicians had attracted attention, ahead of Thursday’s exit announcement, with critical remarks on Ireland’s corporation tax and Dublin’s demand for retrospective recapitalisation of Irish banks.

However senior SPD officials in Berlin with knowledge both of the Irish programme and Berlin coalition negotiations insisted they would not have used a Bundestag vote to delay approval by demanding concessions from Ireland on corporate tax or other issues. “We would have actually preferred that Ireland went for the precautionary funding, we wouldn’t have blocked that,” a senior SPD source said.

Officials from the federal government and the SPD denied the lack of a government meant the Bundestag would not have been able to vote on whether to support precautionary funding from the ESM bailout fund. Although the coalition is still under negotiation, the new Bundestag convened on October 22nd.

Mr McGrath had said there would have been a “headache in Berlin if they had to get parliamentary approval” for a credit line for Ireland.