Ireland's long campaign to cut the cost of the bailout
January 2011:The Fianna Fáil-Green coalition pursues a cut in the interest rate on loans under the EU-IMF deal in November 2010. The question is raised with finance ministers, opening prolonged talks in which Ireland’s corporate tax regime comes under sustained assault from France and Germany.
As Fine Gael and Labour campaign in the general election to impose losses on senior bank bondholders, EU economics commissioner Olli Rehn says euro zone finance ministers will not allow that. The issue is not on the table, Rehn says.
At his first EU summit, Taoiseach Enda Kenny is offered an interest rate cut but declines as this is presented as a quid pro quo for a concession on corporate tax. This is the night of Kenny’s “Gallic spat” with then French president Nicolas Sarkozy. German chancellor Angela Merkel is also sceptical about the Irish request.
Also this month, the new Government agrees to a €24 billion recapitalisation
of the main Irish banks without attempting to force senior bondholders to share the burden.
Minister for Finance Michael Noonan says the Government has a plan to impose “substantial” losses on senior bondholders in Anglo Irish Bank. He says he has won support for the move from the IMF and will proceed if the ECB comes on board.
In the face of market pressure on Spain and Italy, EU leaders finally agree to lower the interest rate on Irish rescue loans and by more than expected. The annual cost of Ireland’s bailout drops by some €800 million as Kenny declares the conflict with Sarkozy to be finished: “It’s over, c’est fini.”
Then ECB president Jean-Claude Trichet rules out imposing losses on senior investors in Anglo. Admitting there is little prospect of the ECB allowing him to do that, Noonan says this is no longer his “primary” concern.
He then seeks to open talks to recast the Anglo promissory note scheme. However, Noonan says the initial response from Trichet is “pretty non-committal”.
As EU leaders develop a plan to impose losses on the holders of Greek sovereign bonds, Dublin is adamant it will not go down that road.
EU leaders agree to create a new international treaty to toughen economic surveillance in the euro zone. Britain vetoes the deal so the leaders proceed with an international treaty operating outside the framework of EU law.
European Commission mission chief to Ireland István Székely says critics of the decision not to impose losses on senior bank bondholders should recognise the benefit the State derives from the interest rate cut. The maximum gain from burning bank bondholders would have been €3 billion but the total benefit from the rate cut would be €12 billion.