Kenny welcomes ‘measures to support’ Ireland’s bailout exit

Taoiseach says ‘safety net’ figure has not been agreed yet

ECB president Mario Draghi said that a “possible successor programme” for Ireland will be taken by the euro group “in due time”. Photograph: The 	Irish Times

ECB president Mario Draghi said that a “possible successor programme” for Ireland will be taken by the euro group “in due time”. Photograph: The Irish Times

Fri, Sep 6, 2013, 01:05

Taoiseach Enda Kenny has welcomed news that a financial “safety net” would be made available to Ireland to ensure its smooth exit from the IMF- EU-ECB bailout programme.

Euro group chief Jeroen Dijsselbloem confirmed yesterday that Europe would provide “measures to support” Ireland’s gradual exit from the programme in December.

Minister for Finance Michael Noonan has suggested the country may require a €10 billion precautionary credit line from its troika partners.

However, Mr Kenny said today that no figure had been discussed, and that Mr Noonan was referring to Ireland’s “potential deficit” for next year.

“That’s an argument and a discussion that will take place at the next troika visit in October ahead of the country’s scheduled exit from the bailout programme in December.”

“But I welcome the fact that Mr Dijsselbloem has indicated quite clearly that Ireland will receive assistance that we might never have to use.”

“We’re know involved in the preparation of details leading to the Budget on October 15th.”

He also denied a Sinn Féin suggestion that the financial support was tantamount to a second bailout.

A €10 billion precautionary credit line, which would roughly equate to the country’s funding needs next year, is one option being considered by the Government as it prepares to become the first euro zone country to exit a bailout.

Such a credit line would be a “safety net” to reinsure investors and purchasers of Irish Government bonds that Ireland could have access to funds if needed, though it is not envisaged that Ireland will need to draw down such funds.

Two senior EU officials yesterday signalled Europe’s willingness to offer some form of precautionary credit line to Ireland.

In Frankfurt yesterday, ECB president Mario Draghi said that a “possible successor programme” for Ireland will be taken by the euro group “in due time”. It was key that “the appropriate framework is in place to safeguard the achievements made” by Ireland during its programme, he said, and to avoid potential risks to full market access once the programme was completed.

Discussions are expected to get under way in earnest in six weeks’ time during the troika’s final visit to Ireland which will take place after the budget.
While Dublin has indicated its willingness to seek a precautionary credit line from Europe to help reinsure investors, there are still “significant divergence” between Dublin and its euro zone partners on the conditions that might be attached to such a programme, including the duration of the credit line, according to one senior euro zone source.

Dublin is wary of signing up to a programme that could be seen as a “second bailout”, something that was suggested by Mr Draghi’s use of the phrase “successor program” yesterday. Though the import of his choice of phrasing was played down by officials, it highlights the sensitivities around the issue for Ireland.

Any precautionary assistance is likely to take a form of an “Enhanced Conditions Credit Line” (ECCL), a precautionary credit line offered by the euro zone’s rescue fund, the European Stability Mechanism (ESM). Ireland would be the first country to draw down the scheme.

Based broadly on the IMF’s precautionary programmes, recipients of the scheme would be subject to enhanced surveillance by the European Commission, review visits and an obligation to file regular reports.

The question of a possible exit programme for Ireland will not be discussed at next week’s informal meeting of finance ministers in Vilnius, according to one euro zone official, with the euro group of euro zone finance ministers likely to give the final sign-off to an exit programme for Ireland in November or December.