Unexpected turn for debt deal campaign

AnalysisAfter months of talks with the ECB, a deal on Ireland's bank debt loomed

Ireland's long campaign for bank debt relief took an unexpected turn last evening as word emerged in Leinster House that the Government was preparing emergency legislation to liquidate Irish Bank Resolution Corporation (IBRC), the State-owned vehicle that controls the former Anglo Irish Bank and Irish Nationwide Building Society.

After many months of fruitless talks with the European Central Bank, an agreement to reduce the debt burden from the two bust lenders appeared finally within grasp.

As a two-day meeting of the ECB governing council kicked off around teatime in Frankfurt, the expectation in the Dáil and Seanad was that Minister for Finance Michael Noonan would introduce the legislation at about 11pm.

Adding to the sense of drama and moment last night was the fact that the Dáil was debating a motion from Independent TD Shane Ross that called on the Government not to pay the next €3.1 billion promissory note instalment.

Although the ECB's support was still not in the bag, frantic moves in Government circles reflected clear indications from Frankfurt that an Irish proposal was finally gaining traction.

This is no small thing. Only a fortnight has passed since the ECB governing council rejected a previous Irish plan, dealing a blow to the Coalition with weeks before €3.1 billion falls due at the end of March.

But things did not necessarily proceed according to plan last night. At about 7.30pm in Dublin - a couple of hours into the ECB meeting - word emerged that the deal would not be done immediately.

Postponement

At first this triggered the postponement of plans for the emergency liquidation law, in anticipation that the ECB would revisit the matter when its meeting continues this morning. An hour later there were indications from the Government that the Dáil would meet at 10.30pm to consider the legislation, with the Seanad to convene two hours later. The Dáil sitting was then further postponed to 11p.m.

In this fluid situation there was little clarity from Frankfurt. "Talks are ongoing," was all an ECB spokesman said.

Whether agreement is finally reached is critical for the Coalition, which has been on a rollercoaster ride with its European partners for months. While previous apparent breakthroughs have so far come to nought, the pressure to deliver a deal is increasingly acute.

Just as Fine Gael is annoyed at shrill language from the Labour camp, Labour feels more exposed politically as deepening budget cuts and talks on a new Croke Park deal eat into its support. Both camps have an interest in securing a sizeable deal - the sooner and the better.