Discussion about the treatment of legacy assets by the euro zone’s rescue fund is expected to gather pace today as euro zone finance ministers meet in Brussels, amid continuing divisions among euro zone countries about the fund’s application to Ireland’s previously recapitalised banks.
The election of the new chair of the euro group will top today’s agenda, but finance ministers will also discuss the thorny issue of how retrospective recapitalisations will be classified by the European Stability Mechanism – a key concern for Ireland as it seeks to secure funding for AIB and Bank of Ireland.
“While technical discussions have been ongoing, the time has come to take a step back and to ask ministers to have a more political discussion about the direct recapitalisation instrument . . . questions around what is a legacy asset, who is responsible for it,” said one EU source.
Finnish perspective
The meeting, which will be attended by Michael Noonan, comes as Finnish prime minister Jyrki Katainen dismissed as “inappropriate” Irish expectations of a special deal on banking debt. Asked how he felt about Ireland’s “special concessions” from German chancellor Angela Merkel and other European leaders in June, Mr Katainen said leaders would return again to the issue of banking debt at this year’s June summit.
“I find it inappropriate, in the middle of the game, to change the rules,” said Mr Katainen in this morning’s Der Spiegel. “Ireland has made excellent work of its reform programme. But the old bank debts of Irish banks are, above all, a problem of the Irish Government. How we will deal with that, I cannot say now.”
Finland shares German concerns that opening the ESM bailout fund to all old euro zone bank debt could leave it undercapitalised for new problems that arise. “The ESM should help banks only in seldom, unusual cases,” said Mr Katainen. “In a bank crisis, the owners and creditors should pay in the first instance. Only when that is not enough should national funds step in for smaller banks and, for the very large banks, the European funds.”
Finland, along with Germany and the Netherlands, publicly questioned the remit of the euro zone’s bailout fund last September, three months after the summit of June 29th-30th pledged to break the links between sovereign and banking debt. “Legacy assets should be under the responsibility of national authorities,” the countries said in a joint statement.
A final decision on the exact remit of the ESM is expected to be months away, with today’s meeting likely to be discursive.
Ireland’s quest for funding from the permanent bailout fund for AIB and Bank of Ireland is separate to efforts to seek a renegotiation on the promissory notes used to recapitalise Anglo Irish Bank in 2010.
Speaking on RTÉ’s The Week in Politics yesterday, Taoiseach Enda Kenny expressed confidence a deal on the note will be struck by the end of March to ensure Ireland will not have to pay €3.1 billion in interest.
