No retroactive deal for Irish banks, says euro zone rescue fund head

Retroactive recapitalisation of the Irish banks "doesn't seem very likely", the head of the European Stability Mechanism, Klaus Regling, has said, striking a blow to Ireland's campaign to receive retrospective aid for AIB and Bank of Ireland.

Speaking last night in Brussels, the head of the euro zone's rescue fund said that, while the process does not require treaty change, it is a "very complicated process" which requires unanimity by member states. "In exceptional cases, and by unanimous votes, there may be retroactive recapitalisation, but it doesn't seem very likely," he said. Earlier, Minister for Finance Michael Noonan said Ireland would pursue the issue over the course of next year, noting that the regulations which govern the manner in which the ESM operates had not been explored.

'Case by case'
While finance ministers agreed in principle to look at retroactive direct recapitalisation of banks on a "case by case" basis in June, ESM direct recapitalisation can only be operational when the Single Supervisory Mechanism is up and running, most likely towards the end of next year. As euro zone finance ministers were briefed on the final troika review of the Irish bailout yesterday, EU commissioner Olli Rehn stressed Ireland would continue to be subject to post-programme surveillance, involving biannual trips, until 75 per cent of its bailout loans were repaid, though the commission would "try and align as best as possible" Ireland's post-programme surveillance with the regular reviews expected to take place under the new "two-pack" rules.

Mr Regling said that, while officials did not want "duplication" or to "overburden" the State, an early-warning system would be in place to ensure repayment commitments are made. "The end of the Irish programme does not mean that our relationship with the country ends. We will have to monitor the country's ability to pay back the loans. We will be there until everything is repaid."

Property prices
Speaking earlier, Mr Noonan, dismissed concerns about a recent rise in property prices.

“Ireland has to be careful but, when you think property prices dropped almost 55 per cent, the increase in 2013 is quite small in proportion to the massive drop. There’s no need for concern yet.” He ruled out any imminent agreement on tracker mortgages, pointing out that the funding position of Irish banks has changed.

“Interventions which we were contemplating to resolve some of the tracker mortgage problems aren’t as apposite now because the margin between the trackers and the changing interest rate scenario have changed,” the Minister said. “Obviously trackers are an issue, but it will not be discussed in today’s meeting, or in the immediate future.”

His comments came as Eurogroup president Jeroen Dijsselbloem confirmed an ESM programme to alleviate loss-making tracker mortgages on Irish banks' balance sheets was not under consideration.