Taoiseach attempts to ignite stalled debt relief campaign
TAOISEACH ENDA Kenny pushed last night to inject fresh impetus into his stalled campaign for debt relief but deepening divisions between Germany and France underlined the difficulty of his task.
In the opening session of a two-day summit in Brussels, EU leaders confirmed an ambitious deadline to achieve legislative agreement on new powers for the European Central Bank to supervise euro zone banks.
The development was heralded as an important step forward in Government circles because Germany, Finland and the Netherlands were opposed to the deadline and favoured a longer negotiation.
This, in turn, is important for Ireland’s demand for debt relief because a powerful new supervisor is a precondition for the ESM bailout fund to directly rescue stricken banks.
One of the Taoiseach’s main objectives is for the ESM to make direct investments in AIB and Bank of Ireland. However, the agreement to strike a deal in December was overshadowed by friction between German chancellor Angela Merkel and French president François Hollande. Dr Merkel faced extraordinary claims from Mr Hollande that she was delaying agreement on a new European “banking union” for selfish electoral reasons.
“Merkel has her own deadline, in September 2013,” the French president said in reference to the date of the German general election. “I can understand this difference in calendars, but we have a common responsibility with Germany to get the euro zone out of its crisis.”
Glaring divisions on other topics were evident as the French and German leaders expressed diametrically opposed views on the expansion of budgetary surveillance in the euro zone. While Dr Merkel and Mr Hollande held a private unscheduled meeting for 30 minutes before the summit, the tension between the two leaders raised questions as to whether consensus could be achieved to speed up measures to tackle the banking crisis.
In the face of the chancellor’s caution, Mr Kenny has aligned himself with Mr Hollande and the leaders of Spain and Italy as they seek to intensify this work. Despite the agreement to strike a deal in December on the new ECB powers, there is still a long way to go. The compromise was silent on when the ECB supervisor will actually start its work.
In addition, EU leaders are far from any agreement on the scope of any bank recapitalisations by the ESM. Of particular concern the Government is the contention by the finance ministers of Germany, Finland and the Netherlands that national bodies should remain responsible for most banking debts.
Mr Kenny’s demand for radical measures to ease the burden of the €64 billion banking debt has run into argument and delay in Europe.
Before travelling to Brussels the Taoiseach attended a meeting of centre-right European leaders in Bucharest, saying there that the EU summit must act to address problems in the banking system.
This was the “Achilles heel” of the euro zone, he said at a meeting of the European People’s Party, Fine Gael’s affiliate in Europe. “For the meeting in Brussels it is very important that citizens of the euro zone and EU see that decisions taken by leaders are implemented,” Mr Kenny said.
Leaders agreed then to break the loop between bank and sovereign debt but the endeavour has been undermined by conflict over the scale and timing of this initiative. Officials involved in the summit said there was little prospect of any substantive discussion on the question of “legacy” or historic bank debts.
Economics commissioner Olli Rehn said this was a “confusing” and “problematic” concept.
“There are negotiations going on between the Irish Government and European institutions following in line with the summit in June and these are making progress but it is too early to say anything about the likelihood or likely outcome.”