Ireland was right to exit bailout without credit line, says Regling

Managing director of ESM says the country’s bailout programme was ‘real success story’

The head of the euro zone's rescue fund Klaus Regling says Ireland was "right" to exit the bailout programme without a precautionary credit line.

Mr Regling, who is managing director of the European Stability Mechanism (ESM), said the reaction of financial markets indicated it was the right decision.

He described Ireland’s bailout programme as a “real success story”.

However, he said that with the economy still suffering the effects of higher unemployment and lower real income, many may not view it as a success.


“Unfortunately, this is normal in a crisis. Populations will only see later the benefits of all the adjustments.”

Asked about the prospects of the ESM retroactively reimbursing the State for the costs of bailing out its banks, Mr Regling said the issue was under consideration by the euro group in the context of banking union.

He said the ESM currently did not have “the instrument of direct bank recapitalisation” at its disposal.

If the ESM treaty was changed to provide for retroactive recapitalisation then it might be possible for the fund to take an equity stake in the Irish banks, as has been suggested.

Such a decision would not be made for at least a year, however, he said in an interview with RTÉ News.

On whether the Irish banks may need further injections of the capital, Mr Regling said the sector had been scrutinised several times in the past and would be subject to further asset quality tests by the ECB next year.

“We’ll see whether there are any capital gaps but I do not really expect that to be the case in Ireland.”

He also ruled out the likelihood that Ireland would need any restructuring of its debts in the near or medium, primarily because debt-servicing costs remain very low.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times