Irish bank debt deal 'problematic'

Bundesbank concerned about inter-linkage created by promissory note deal.

Bundesbank concerned about inter-linkage created by promissory note deal.

Mon, Feb 18, 2013, 00:00

The involvement of the Irish Central Bank in the promissory deal is "problematic", Germany's Bundesbank said in its monthly report today.

The German central bank highlighted what it described as "the increasingly stronger and more problematic inter-linkage between monetary and fiscal policy in the European monetary union".

"The European Stability Mechanism, which should be responsible in this regard, has been established to provide any help to individual member states in servicing debt," it said.

The accord, which will see the promissory notes exchanged for long-term bonds held by the Central Bank, will ease Ireland's borrowing needs by up to €20 billion over the next decade.

Earlier, Minister for Social Protection Joan Burton dismissed suggestions that the deal is in danger of unravelling, saying it was "generally recognised" that the agreement was helpful to Ireland and the European Union. She also reiterated that savings from the deal should be availed of this year despite resistance from the troika to any such move.

The Government is facing resistance from the troika against any move to use gains from the Anglo Irish Bank promissory note deal to soften next year’s budget.

"I think the troika, no more than myself, must be very, very aware of the difficult news that unemployment in the euro zone countries is at 11 per cent and overall in the EU at 10 per cent. They are shockingly high figures, and in Ireland it’s 14.6 per cent," Ms Burton said in Dublin this morning.

Additional reporting: Bloomberg

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