Noonan hopes for troika's agreement to reduce €31bn Anglo debt burden

MINISTER FOR Finance Michael Noonan is optimistic that an agreement can be reached with the EU-IMF troika to reduce the debt burden of Anglo Irish Bank promissory notes worth over €31 billion.

After talks with his German counterpart Wolfgang Schäuble in Berlin, Mr Noonan also said it was “ludicrous” to speculate so early into the first bailout programme about whether Ireland would need a second one.

On the Anglo debts, Mr Noonan said troika officials were preparing a joint technical paper, drawing on Irish suggestions, to reduce the overall burden involved in repaying the principal of the €31 billion promissory note.

This loan arrangement predates the EU-IMF programme and was agreed to fund an effectively insolvent Anglo Irish Bank but is seen by the Government as too expensive.

“We think there’s a less expensive way of doing it by financial engineering, and we’re not talking about private-sector involvement or restructuring,” said Mr Noonan in Berlin.

“It’s not about Ireland coming up with additional demands, it is about pointing out to the troika that there are difficulties and that it could be less expensive – and everyone still gets their money.”

The talks are still at a technical level and some way from being presented for political agreement, but Mr Noonan said German officials were aware of these talks and that they understood what was involved.

A senior German official said Berlin could envisage extra programme funding being used for the Irish banking sector not currently earmarked for this purpose.

Mr Noonan would not rule in or out a second bailout, but said arrangements were already in place to extend the existing programme if needed.

“There will be a stream of credit available if a programme ends and a programme country is not back in the market. That’s already in the system.”

In talks with Mr Schäuble, Mr Noonan laid out Ireland’s concerns for the year ahead, in particular the economic knock-on effects, on Ireland, of a euro zone slowdown.

“I hope the larger European countries will bear this in mind when they are planning the future,” said Mr Noonan.

German officials who participated in the talks said they were well aware of the burdens Ireland faced – both on the financial and reputation fronts.

Ireland and Germany had much in common, one Berlin official said: both were under pressure as “poster boys” for austerity, and both faced the risks, in 2012, associated with having export-driven economies.

Both sides agreed that there are other possible ways to stimulate European economic activity in the difficult year ahead. Mr Noonan favours completing the internal market and further interest rate cuts from the ECB.

He said he hoped that the ECB would extend its programme of low-interest loans beyond next month to improve euro zone bank liquidity in the hope it would stimulate the market in longer-term sovereign debt papers.