IMF deal on table if no bank debt agreement, sources say

Details of the Government’s strategy to win a bank debt deal and exit the bailout emerged yesterday in Davos. Government sources said Ireland is prepared to accept a new, conditional IMF programme if bank debt talks do not deliver optimal conditions for returning to markets.

Officially Irish representatives at the World Economic Forum declined to discuss details of a possible successor IMF programme other than to say “all options are on the table”, upping the ante for a debt deal.

But a Government source said: “As we move to the end of the programme we are looking at all the various options available to us. It’s much too early to say which options will be required but we are not ruling any out.”

Germany appeared to be caught unawares by the Government’s discussions with the IMF, and officials in Berlin declined to comment yesterday.

If Ireland were to enter a conditional programme with the IMF, it would have the effect of depriving the European Union of a much-needed economic success story.

Irish officials said whether Ireland availed of the IMF offer would depend on many factors, including the outcome of ongoing negotiations on Ireland’s banking debt.

Strategy

However, if the Government’s strategy is perceived by European partners as an overt attempt to exert pressure to expedite agreement on debt concessions, it could backfire.

Officials familiar with the talks said any new line of credit from the IMF – if agreed – could take the form of an active or precautionary arrangement.

Such exit arrangements are common, though not obligatory, for programme countries; nor are such backstops always activated.

“How these negotiations work out will have an impact on how we are perceived by markets,” said the Government source.

One source familiar with troika talks said the prospect of additional IMF assistance could be a double-edged sword for the Government. Successor programmes, as with all IMF credit, are always conditional. The strings attached could be entirely new or could draw on politically unpalatable conditions from the old programme.

Taoiseach Enda Kenny left Davos yesterday confident that business and political leaders had heeded his warning that Ireland’s recovery was fragile and dependent on the coming months.

Tánaiste in Chile

Meanwhile, Tánaiste Eamon Gilmore has taken Ireland’s campaign for a renegotiation of its bank debt to South America, arguing for an “appropriate agreement with the European Central Bank” at a gathering of EU and Latin American leaders in Chile.

Mr Gilmore said such a deal was necessary to bring about a “post-crisis Ireland”. His comments form part of the latest diplomatic offensive by the Government to convince its EU partners to renegotiate the country’s bank debt.

Over the weekend, at the first gathering of EU leaders during the Irish presidency of the bloc, the Tánaiste will meet with German Chancellor Angela Merkel and hold bilateral talks with the prime ministers of France and Finland as well as Chilean president Sebastian Piñera.