Minister for Finance Michael Noonan has given the strongest signal yet that Ireland may avail of the European Central Bank's outright monetary transactions (OMT) facility before it exits the bailout later this year.
Mr Noonan said yesterday the State would be eligible for the scheme if it holds one more debt sale. “It seems to me that if we had one more sale of Irish paper, we would be eligible for OMT.”
He said it was “something we will consider, certainly”, adding that the scheme had had a “major effect on bond spreads across Europe”.
“We haven’t decided in Government yet whether we will apply or not, but it is something that seems to be a mechanism that is working very well and it might be something that we would want to avail of coming out of the bailout.”
Mr Noonan said Ireland was examining the issue “at the level of principle” at the moment.
Markets calmed
The ECB launched the OMT programme last September. Despite the fact that the bond-buying programme has not been activated, it has been widely credited for calming markets.
In March, ECB president Mario Draghi said that, to be eligible for the OMT scheme, countries would have to have returned to markets. It is not clear what conditions, if any, would apply if Ireland was to use the OMT facility.
Mr Noonan was speaking ahead of a key meeting of EU finance ministers in Brussels today, at which the Irish presidency will strive to secure consensus between member states on Europe’s new bank resolution rules, amid divisions between countries on the requirement to bail in uninsured depositors.
The Irish presidency, which is representing the European Council in discussions, favours a depositor-preference system where uninsured depositors of over €100,000 would be the last in line to be "bailed in" in the event of a bank wind-down.
Some member states believe the proposals are too prescriptive and want states to have greater discretion in implementing the bail-in tool.
'Confident' of progress
Mr Noonan, who chairs today's meeting, said he was confident progress would be made on banking union. "We've done a lot of pre-meeting work so I'm fairly confident that we'll have a very full discussion, a full political debate. It's not a debate to arrive at precise decisions; it's a debate to move the project forward to the next stage."
He added that he hoped to get high-level agreement by June.
Under the Irish presidency’s compromise proposal, countries will be required to set up national resolution funds to cover wind-ups of troubled banks, equating to 0.5 per cent of covered deposits of the financial institutions. Institutions would have to make annual contributions based on their liabilities.
Speaking after a meeting of euro zone finance ministers yesterday, EU economics and monetary affairs commissioner Olli Rehn said banking union was one of the most "crucial tasks in the coming months and years" for Europe.
