Talks with ECB over Anglo debts intensify

Sat, Sep 15, 2012, 01:00

EURO ZONE CRISIS:THE GOVERNMENT is intensifying its dialogue with the European Central Bank in the hope of an agreement to restructure the debts of Anglo Irish Bank.

As a senior ECB official said negotiators were under time pressure in the talks, Minister for Finance Michael Noonan said it was open to the Government to strike a bilateral deal with the central bank to recast the Anglo promissory note scheme.

Mr Noonan said this was different from talks on a scheme for the European Stability Mechanism (ESM) fund to directly recapitalise Bank of Ireland and AIB, as any deal on that front can only be done with the approval of all euro zone governments.

At an EU meeting in Nicosia yesterday, the Minister spoke to ECB chief Mario Draghi. Further weekend talks on the Anglo debt were planned with ECB executive board member Jörg Asmussen, it is understood.

The possible timing of any deal remains unclear. While the ECB has long harboured big reservations about any new promissory note deal, Mr Asmussen made a point of telling reporters last evening that the bank’s engagements with the Government were continuing.

“There is nothing that I can report on the final outcome on this. We are under heavy time pressure working on this question,” he said.

Mr Noonan said earlier that a restructuring of the Anglo notes could be settled with the ECB directly. “It would be possible if the central bank were willing to almost arrange that on a bilateral basis and have it endorsed by colleagues subsequently, whereas anything along the lines of the Spanish intent of having the banks recapitalised would be a plenary decision.”

The Government received copious praise as euro zone ministers reviewed the Irish bailout but Mr Noonan’s counterparts stopped well short of a deal on bank debt relief. As Noonan sought clarity from Spain over the next phase of its bailout, a succession of EU/IMF “troika” leaders lauded Ireland as an exemplar for other member states.

But there was no mention of the October deadline for a debt-relief deal, which the ministers set in July, and economics commissioner Olli Rehn said the quality of the end result was more important than the schedule.

“There is growing confidence in Ireland among investors, reflected in its earlier-than-foreseen return to the markets. This improved sentiment is in part due to the commitment made by the euro area,” Mr Rehn said.

The IMF said this week that transferring the ownership of Ireland’s surviving banks to the ESM fund could support the recovery.

Still, the fund’s chief, Christine Lagarde, did not elaborate when asked how important a debt relief deal would be to ensure the success of the bailout programme.

“It is important, no question about it, and let me just observe one more time that Ireland has been exemplary in delivering on the implementation of its programme otherwise, which is to be commended,” Ms Lagarde said.

On the timing of any agreement, euro group president Jean-Claude Juncker said only that the ministers would discuss a “possible improvement” of the Irish programme “at one of our next meetings” following the conclusion of technical discussions.

Arriving for yesterday’s meetings, Mr Noonan said his claim for a revision of the Irish bank rescue was contingent on events elsewhere and “especially in Spain”.

Although he declined to say when an agreement might now be reached, he insisted other governments remain committed to a new deal. The direct recapitalisation of the surviving Irish banks by the ESM fund depends on any arrangements made for Spain, which is reluctant to seek a full sovereign bailout.

Madrid secured an EU deal for its banks during the summer but it is now under pressure from the European authorities to seek more rescue aid. EU leaders agreed in June to allow the ESM to rescue Spanish banks and pledged to provide equal treatment to Ireland.

However, Spain wanted the ECB to buy sovereign bonds before it seeks any more aid. The ECB moved last week, but Spain is still resisting. Asked what he wanted to hear from the Spanish government, Mr Noonan said he was seeking clarity.

“I’d like them to set out their position because it hasn’t been clear over the summer what their position is,” he told reporters. “Certainly any arrangement which would have the direct recapitalisation of Spanish banks and applying that formula to Ireland is contingent on progress being made on Spain.”