Burden will be eased but tough budget still necessary, says Kenny

BANK DEBT:THE BURDEN of bank debt on the people of Ireland will be eased significantly by the outcome of the summit, said Taoiseach Enda Kenny. However, there would be no change in the requirement for a tough budget in December to reduce the public debt, he added.

Mr Kenny told a press conference he had come to Brussels with two objectives: “One was to deal with the agreement on a growth pact for Europe; and the second was to get an agreement on a European response to the banking crisis which would take account of Ireland’s legacy bank debt. I am happy to report that we have had significant progress on both of those fronts.”

He said getting the heads of government to break the fundamental link between sovereign and bank debt was a very important principle. “The agreement that we have now brought about here allows the European Stability Mechanism (ESM) to be used directly in capitalising banks and that represents a seismic shift in European policy and it is one I have been advocating for several months.”

EU leaders had specifically agreed the issue of Ireland’s legacy bank debt should be re-engineered to reduce the burden on the Irish people, he added. “I also feel that having spoken to every one of the other 26 leaders that there is a recognition of what the Irish people actually did during the recent referendum in giving a very clear decision in passing the fiscal stability treaty by a 60/40 margin.”

Mr Kenny said the process regarding Irish bank debt would now move to July 9th when euro zone finance ministers would meet to discuss the issue.

“We are not in the business about talking about writedowns here. It is not a case of the bank debt vanishing,” said the Taoiseach, who described the summit as one of the most productive he had attended.

However, the outcome on bank debt should not be regarded as the answer to all the country’s problems. “It does not change the fact that we still have a very difficult and challenging budget coming up. We have to deal with our deficit and that is what we are going to do.” The Taoiseach said euro zone finance ministers would consider a range of options when they meet on July 9th.

“There are a whole variety of options that are open for the Euro group to consider. The discussions around the technical paper from the troika will now feed into this process. The end result will be a re-engineering to lessen the debt burden on our people.

“I do sense a seriousness among the leaders of Europe to step back from the abyss and start making decisions. As this process rolls out people will understand that Ireland is a serious country.”

He expressed the hope growth would return to the European economy because of decisions taken in Brussels and he pledged that in Ireland the jobs action programme and labour activation measures would take as many people as possible off the live register.

The Taoiseach said the compact on growth and jobs agreed at the summit would involve a €120 billion package through the European Investment Bank to fast-track growth measures. It was specifically written into the conclusions that Ireland and all other countries would be able to avail of this. Project bonds presented an opportunity as they would no longer be restricted to major trans-continental schemes as originally planned. “On my own recommendation these are now available to all countries. It is a case of Ireland being able to generate appropriate schemes.”

He also said the Irish presidency of the EU next year would be an opportunity to improve trading links through the conclusion of agreements with Japan, India and Canada that had been in the air for some time.