State can delay move on bailout exit, says troika

Troika inspectors believe it will be open to the Government to wait until the new year to decide whether it should seek a post-bailout credit line.

The EU-ECB-IMF troika’s position is at odds with the public stance of the Coalition, which has suggested previously that it will make its intentions known before the bailout ends in mid-December.

As talks continue in Berlin on the formation of Angela Merkel's next government, the argument is made in troika circles that there can be no clarity over any backstop aid for Ireland until the chancellor's new administration takes office.

The  troika is due to conclude its final visit to Dublin today ahead of Ireland’s exit from the bailout programme next month.

'Technical' adjustment
In recent weeks, the EU powers quietly prolonged the period in which Government can draw down loans under the current bailout programme by two months until the end of February.

The view within the troika is that this “technical” adjustment provides a window until then for the Government to make a final decision on a precautionary credit facility, for use only in a financial emergency.

In troika circles, the expectation is that the Government will not declare any formal application until it knows the likely outcome of the negotiation.

Last night a spokesman for the Department of Finance said no decision has been made yet on whether a credit line is sought and stressed the question was finely balanced.

He pointed out, however, that the International Monetary Fund programme concludes on December 15th and that a decision on any application was likely before that date.

Within the troika, meanwhile, the argument is made that Dr Merkel’s caretaker government has no mandate to agree on a credit line and her incoming coalition would have to consider the terms on which any credit line is granted.

It is believed the new German government would favour a single approach to parliament, with any scheme for Ireland bundled together with any new measures for other aid recipients such as Portugal and Cyprus.

The German preference is to avoid a drip-feed to the Bundestag, prolonging negative debate and possibly leading to roadblocks in parliament.

As the final troika bailout review ends today, the Government’s execution of the rescue plan is set to be endorsed by the international inspectors.

Although the assessment of the European Commission, the European Central Bank and the IMF is largely positive, they remain wary of unresolved problems in the banking sector and there is concern in some quarters that certain assumptions in Budget 2014 might be too optimistic.

Recovery proceeding
The essential thrust of their assessment is that the recovery, although fragile, is proceeding well and that this has been recognised by market investors. There was no breakthrough in the effort to ease the cost to the banks of expensive tracker mortgages, which is a particular problem for Permanent TSB.

However, the most immediate question centres on whether Dublin seeks a precautionary loan facility to guard against any return of turmoil next year. At issue is the force of the policy conditions that would be tied to such aid.