October target for bank debt deal
The Government is working to a deadline of the end of October for reaching agreement with the European Union on substantial reductions in the State’s bank debts.
Minister for Finance Michael Noonan will table the Government’s first proposals for a revised banking debt arrangement for Ireland at a meeting of EU finance ministers in Brussels next Monday.
However, Mr Noonan, Taoiseach Enda Kenny and Tánaiste Eamon Gilmore have all refused to quantify the scale of bank debt reduction they will seek when negotiations begin in earnest next week, although it is understood officials are working on a possible cut of upwards of half of the total €63 billion spent to date on bailing out the banks.
Mr Noonan said over the weekend he wanted a successful outcome on the bank debt issue before the budget in December. Last night, senior sources familiar with the process said, in practical terms, that meant a resolution by the end of October.
The Government also needs to be in a position to have certainty by the end of October over the State’s ability to fund itself over the following 12 months: this one-year-rule is one of the preconditions laid down by the International Monetary Fund for programme countries.
At the meeting on Monday, Mr Noonan will outline for the first time the Government’s detailed interpretation of the outcome of last week’s summit in Brussels, which agreed that bank debt should be separated from sovereign debt. The conclusions specifically mentioned the sustainability of Irish debt and the principle of equivalence in the EU’s response to crises in different countries.
Mr Gilmore and other senior figures emphasised the complexity of the negotiations, particularly in applying new rules retrospectively to bank debt already borne by the Irish sovereign.
“You have to look at our record. All of the records we have conducted with the troika, the EU and other member states have been conducted in private. That’s the most productive way of getting an outcome,” he told The Irish Times.
It is understood the Government will be guided to a certain extent by the agreement that may be reached with Spain. But, expressing a note of caution, the Taoiseach’s spokesman last night said there was overlap but there were important differences, not least that Spain does not have the same retrospection issue as Ireland.
Following next week’s meeting of finance ministers, Mr Noonan will continue negotiations at a euro group meeting later this month, with a view to having political agreement on Ireland’s case before the next summit of EU leaders in late October.
There is an assumption, according to sources, that a successful resolution would allow Ireland’s overall debt fall from a peak of 117 per cent of gross domestic product to about 100 per cent. In monetary terms, that would amount to some €34 billion, or slightly over half of the overall bank rescue cost.
Fianna Fáil leader Micheál Martin said the outcome had helped save the euro but claimed Mr Gilmore was indulging in “retrospective spinning” and was playing up the Government’s part in achieving the deal in Brussels. Pearse Doherty of Sinn Féin expressed concerns that the Irish taxpayer might still be on the hook for the bulk of the bank debts.
Separately, Mr Gilmore defended comments by his Labour ministerial colleague that seemed directed at the budget later this year.
In a speech this weekend, Minister for Social Protection Joan Burton suggested increases in PRSI, saying the Irish rate was lower than other countries. Mr Gilmore defended Ms Burton yesterday, saying she was quite right drawing attention to shortfalls in the social insurance fund.