How the deal was done

EU SUMMIT:German chancellor Angela Merkel was met with uncompromising and forthright demands and, this time, the policy changed

THE NEW deal to confront the debt debacle was finally struck around 4am in Brussels yesterday as talks between weary EU leaders drifted past their 13th hour and onwards towards a rainy sunrise.

At issue from the outset was whether Angela Merkel would give Germany’s assent to contentious new measures to provide direct aid to banks and buy Italian bonds on the open market. Having said No all along, she finally gave the go-ahead for yet another escalation in the battle to save the single currency.

The undercurrents had been moving but not quite visibly.

“It’s never clear until the very moment that they have to deliver,” said a high-level European figure of Berlin’s approach to negotiations.

Although the scope of the deal would be far wider than thought in the long weeks of brinkmanship and public divisions, agreement was already taking shape when global leaders met in Mexico for a G-20 summit. Merkel faced renewed pressure from President Barack Obama for action to douse the flames but gave no public indication of any change.

But change was afoot even as top Berlin officials warned there was no scope for flexibility before parliamentary votes last night on the fiscal treaty and the treaty setting up the ESM. German finance minister Wolfgang Schäuble had travelled to Paris on Tuesday night for a pre-summit dinner with his French, Spanish and Italian counterparts.

The Spanish bailout proposal was not working, an initiative that specifically ruled out direct aid, and Italy was coming under market pressure again. When these questions came to be settled in the middle of Thursday night, the way opened for Taoiseach Enda Kenny to seize a deal to cut Ireland’s onerous banking debt.

After months of fruitless campaigning, this marked a breakthrough for Dublin with the beginning of a new approach to mountainous debts assumed by the Irish people when the last Government guaranteed the banks.

Kenny had written to his counterparts on the banking question in the days after the fiscal treaty referendum last month. At one stage or another during the summit, he spoke with every one of the other 26 leaders.

The Taoiseach’s basic message to the summit was unchanged from previous encounters: Europe needs a success; Ireland can be that success; Ireland is fulfilling its obligations under the EU-IMF-ECB troika; some form of bank debt relief would ease the path back to private markets.