Only one thing is made clear: the need for ambiguity

Tue, Oct 23, 2012, 01:00

AMBIGUITY WAS on the menu yesterday in Berlin as perplexed German political correspondents began asking questions about Sunday evening’s Kenny-Merkel statement.

What makes Ireland so special, they wanted to know at the government press conference, and was German chancellor Angela Merkel backtracking on her Friday remarks on ruling out “retrospective recapitalisation” of euro zone banks?

Government spokesman Steffen Seibert explained how, after speaking to Taoiseach Enda Kenny, Merkel believed Ireland’s situation was particularly worthy of special treatment.

“In Ireland it is the case that the Irish government recapitalised its banks with large amounts of tax money and this will certainly be taken into account when the euro group addresses the issue of Ireland again,” said Seibert. “Sunday’s statement is naturally a strengthening of what [euro group leaders] agreed in June.”

As leaders have yet to agree on what exactly they agreed in June, an air of mystery surrounded the Berlin press conference over what has been strengthened besides vagueness. Talking to officials involved, each side blames the other for stripping away the ambiguity of the June 29th summit deal. It promised to look again at Ireland’s EU-IMF programme without specifying the when, how or what of the procedure.

Irish officials say they told their German counterparts that, by leaving crucial points open, the June statement was a cheap and effective way of calming markets for the coming months to give wriggle room for political negotiations and breathing room for Ireland’s finances.

Irish officials saw Merkel’s statement on Friday as the final straw in a series of remarks involving Germany, going back to September, that the European Stability Mechanism (ESM) bailout fund would not touch so-called “legacy debt”. Berlin refused to leave well enough alone, Irish officials say, leaving Ireland exposed.

Claims in Ireland that Merkel was motivated by domestic politics is understandable, but possibly wide of the mark. There is almost a year to polling day here and, if anything, Merkel’s domestic situation on Europe has eased.

For months her conservative Bavarian allies have rattled the rhetoric chains, demanding that Greece be cut loose from the euro zone. Now, rising in polls, the Bavarian CSU has softened its euro-critical rhetoric. This has lessened the need for Merkel to wield the stick around Europe to impress nervous coalition allies or uncertain voters at home.

If that is the case why, Irish officials wonder, did Berlin refuse to leave well enough alone? Berlin tosses back to Dublin the claim over who shattered the ambiguity of the June statement. Long before the finance ministers’ statement from Finland, they say, the European Commission and the Government in Dublin were speculating about how Ireland’s debt woes could be addressed, and when. This added to concerns in Berlin, The Hague and Helsinki over Spain’s banks and the fear that the ESM could drown in new expectations and old debt before it even began working.

There was surprise in Berlin that the chancellor’s assertion on Friday generated such a heated response in Ireland. The German reading of the June deal is that leaders made no time commitment or guarantee for changes for Ireland and, in particular, made no link between the banking debt issue and improving its programme’s sustainability.

So does the Sunday evening statement change anything? German officials declined to be drawn on specifics yesterday and were particularly tight-lipped on what precedent, if any, the statement sets.

Is there any legal basis for preferential treatment for one programme country over another? The widespread understanding of June’s summit conclusions was that, if Spain were to get any special deal from its euro partners, Ireland would also. But if Spain doesn’t get something – relief on legacy debt, for instance – can Ireland? And what of Greece or Portugal? No answers.

German officials are keeping mum on what is possible, hopeful that enough ambiguity has been restored to veil ongoing technical talks. “We will leave all of that up to the imagination of the negotiators in the coming weeks,” one official said.

One thing is clear: when German finance minister Wolfgang Schäuble is in Dublin next Monday, his audience will be even more attentive than might have otherwise been the case.