Irish debt-relief decision in October
Euro zone finance ministers resolved early this morning to take a final decision in October to provide an unspecified amount of bank debt relief to Ireland.
The unanimous move to set the deadline, at a nine-hour meeting in Brussels, marks a step forward in the Government’s long campaign to reduce the burden of the State's €60 billion-plus banking debt.
Although the mechanism to be deployed and the amount of relief in play remain unclear, the European Commission will develop concrete proposals to be submitted to the ministers in September.
“That’s very positive. It’s positive for Ireland, its chances of succeeding in its reform programme and thus it’s positive for the whole of Europe,” Mr Rehn told reporters around 3am in Brussels.
“As journalists you know that it’s the deadlines that run the world so it’s important that we have a very clear timeline it was by unanimity – by consensus – agreed that the timeline for looking into solutions for debt sustainability of Ireland is now in the course of September with a view of decisions in October.”
The move by the euro group came as Minister for Finance Michael Noonan pressed for a speedy deal to revise the bank rescue and linked the question to an International Monetary Fund review of Ireland’s bailout later this year.
This is a crucial procedure under the IMF’s own internal rules as it does not lend to countries judged to have an uncertain funding profile over a 12-month horizon.
Any deal to improve Ireland’s debt sustainability in a significant way would increase certainty over the Government’s finances by improving the prospects for a definitive return to debt markets as the bailout ends next year.
EU leaders decided last month to reopen the Irish bank bailout. They also resolved make direct bank aid available to euro zone countries, but only after the introduction of a new pan-European bank regulator.
European officials acknowledge this system will not be in place by October, raising questions as to whether the initial debt relief arrangement might be limited to a revision of the €47 billion Anglo Irish Bank promissory note scheme.
The Commissioner left open the possibility of direct bank recapitalisations eventually but he would not say whether the likely agreement would cover all the banking debt or be limited to the promissory notes.
“It is better not to go in very concrete detail at this stage because we have technical negotiations going on for the moment,” Mr Rehn said.
“Let these negotiations between the Irish authorities and the European partners move forward. I’m confident that we will find a solution that, as the statement today says will help to improve [the] debt sustainability of Ireland and thus make Ireland a success story again.”
Asked about the necessity to put the supervisory mechanism in place before direct bank recapitalisations, the commissioner said all participants in the talks knew the issues and challenges faced by Ireland.
“Let’s not jump the gun and let’s now focus on the concrete technical negotiations,” he said.
“As regards direct bank recapitalisations, that is possible once there is a truly effective single supervisory mechanism in the union.”