Hollande's support raises Irish hopes of bank debt relief deal
PRESIDENT FRANÇOIS Hollande has promised French support for Ireland in its efforts to secure a bank debt deal, lifting Irish hopes of an agreement after a round of frenetic diplomacy.
Mr Hollande said Ireland was “a special case” and must be treated as such when euro zone finance ministers negotiate a deal on how to break the link between sovereign and bank debt over the coming months.
German chancellor Angela Merkel caused consternation in Dublin last Friday when she said historic or “legacy” debt would not be covered by the European Stability Mechanism (ESM) rescue fund, echoing earlier remarks by her finance minister Wolfgang Schäuble.
Her comments appeared to derail Ireland’s efforts to ease its multibillion-euro bank debt burden.
However, she and Taoiseach Enda Kenny issued a joint statement on Sunday affirming that the “unique circumstances” of Ireland’s economic crisis required a special approach.
After a 50-minute meeting with Mr Kenny at the Élysée Palace in Paris yesterday, Mr Hollande endorsed Dublin’s position and said Ireland had to be dealt with as a special case.
“The Irish specificity is that for several months there had already been a recapitalisation of banks through the budget, which further exacerbated Ireland’s debt and forced it to impose a tough austerity programme,” Mr Hollande said.
“Ireland is a special case and should be treated as such.”
Asked by The Irish Times if this meant he agreed that the ESM bailout fund should pay for historic banking losses, the president replied: “Yes. Ireland is asking that its specific situation should be taken into account – that it had to recapitalise its banks with its own means. The eurogroup will take this specificity into account.”
The Government hopes the carefully weighted language in the statement between Mr Kenny and Dr Merkel – repeated by Mr Hollande – has reopened the door to a deal that would make good on a pledge by European leaders in June to sever the loop between sovereign and bank debt.
Mr Kenny said Ireland was a special case because it had a European remedy “imposed upon it” when the banking sector collapsed.
“Ireland was the first and only country which had a European position imposed upon it, in the sense that there wasn’t the opportunity, if the Government wished, to do it their way by burning bondholders,” he said.
“The Irish public and Irish taxpayer were required to service the full extent of the debt, which was a situation we’re trying to reduce by the negotiations which are going on.”
The question of who takes responsibility for “legacy” banking debts has divided Germany and France. Last Friday in Brussels, Dr Merkel dismissed “retrospective recapitalisation” of banks, saying such a move would be possible only for future debts, under an EU banking regulatory regime.
But French officials say it was clear that including old debt was in the spirit of the June deal, and hope finance ministers can reach a technical accord by the end of the year.
In Berlin, government spokesman Steffen Seibert reiterated the thrust of Sunday’s joint statement, saying the fact that Ireland had put large amounts of taxpayers’ money into its banks would be taken into account by finance ministers. “Sunday’s statement is naturally a strengthening of what [European leaders] agreed in June,” he said.
At a summit in Brussels last week, EU leaders agreed to set up the legal framework for a European banking supervisor – a key step towards the direct recapitalisation of banks – by the end of the year. Mr Hollande said he believed recapitalisations could begin next year.
In Paris for his first visit as Taoiseach, Mr Kenny briefed his French counterpart on Ireland’s preparations for its EU presidency, which begins in January.
The two men also discussed forthcoming talks on the seven-year EU budget, with Mr Hollande saying they were “in complete agreement” on agricultural policy and structural funds.