State has ‘moral authority’ to seek debt relief from Europe - Rabbitte

Blanket guarantee for banks was a ‘mistake’, Olli Rehn says

The moral authority for Ireland was for ‘some amelioration of the debt burden’ , Minister for Communication Pat Rabbitte said today. Photograph: Cyril Byrne/The Irish Times

The moral authority for Ireland was for ‘some amelioration of the debt burden’ , Minister for Communication Pat Rabbitte said today. Photograph: Cyril Byrne/The Irish Times

Fri, Dec 13, 2013, 12:15

Ireland has a “very strong moral authority” to seek some form of debt relief from Europe after protecting European banks from contagion, Minister for Communications said today.

Speaking as Ireland exits the bailout and asked about what is needed from Europe, Pat Rabbitte said: “I think we have a very strong moral authority behind our case as a small country we took in order to protect the banks of Europe from contagion...”. The moral authority for Ireland was for “some amelioration of the debt burden” he told RTÉ’s Morning Ireland

“I believe that Ireland did take a hit for the team. I believe that there wasn’t burden sharing when it came to it,” he said today.

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His comments come as Ireland continues campaigning for further debt relief for its investment in the banks through the ESM fund.

Progress had been made by the Government with Europe in “patient diplomacy” and that effort would “have to go on “ as the debt is “challengingly high” , he said.

Mr Rabbitte said when the Fine Gael/Labour Government was elected they “wanted to ensure that the bond holders took their proportionate share of the hit”. However the ECB at the time under former head Jean Claude Trichet “in very dramatic terms prevented that happening.”

Mr Rabbitte said the bailout exit meant “an injection of confidence that you can feel around the place” and a “psychological advantage” of being “back in control of our own financial destiny”

However he said much “depends on growth” and our accumulated debt was still “inordinately high”.

Meanwhile European Commissioner for Economic and Monetary Affairs Olli Rehn described the 2010 blanket guarantee for banks as a “mistake” but said that was “now water under the bridge”.

He had been “quite shocked” to hear of Ireland’s capital hole when he met with then finance minister, the late Brian Lenihan, in September 2010 to discuss the Irish situation for the first time.

“Even though I was quite prepared to hear large figures I was quite shocked when hearing that the capital hole was 60per cent of GDP,” he told RTE’s Prime Time programme in an interview aired last night.

Mr Rehn said he believed what happened to Ireland was “very unfortunate”. Its situation now was “quite promising”, he said.

“Ireland is at a critical juncture …I am now very confident that it is now on a positive path both concerning economic growth and public finances”.

Speaking on the prospect of using the European Security Mechanism, Minister for Finance Michael Noonan said he was “still hopeful” but it was “not going to happen quickly” and was more a “medium term strategy”.

“The ESM isn’t fully operational but the guidelines in which will it operate have been put in pale and they include the possibility of retroactive recapitalisation of the banks,” he told Sean O’Rourke on RTÉ Radio.

However he said anything the ESM does would “have to be by unanimous decision” and agreed by 28 countries which is “always difficult from a negotiation point of view”

The German system of negotiation was “different” but it was “very important to keep relationships with the German administration” which has been “very supportive of Ireland’s position”, he said.