Anglo debt talks 'resolved' by March

Tánaiste Eamon Gilmore expects the Government to have settled discussions with the European Central Bank on the debts of Anglo Irish Bank before a €3.1 billion promissory note payment falls due next March.

In Brussels today, Mr Gilmore also said he expects EU leaders to agree new powers for the ECB to supervise banks at a summit on Thursday and Friday.

These powers are key precondition for the ESM rescue fund to recapitalise stricken banks directly, something the Government wants it to do for Allied Irish Banks and Bank of Ireland.

Mr Gilmore also said the political turmoil in Italy underscores the merits of stability in his own Government.

He was speaking after a meeting with European Council president Herman Van Rompuy.

While reporting progress in talks on the new ECB powers, Mr Gilmore said unresolved questions over the treatment of legacy or historic banking debts must be settled early in 2013.

Germany and its allies don’t want the ESM to bear any historic debts built up by banks in other countries, but he insisted it was feasible to strike a deal on this question within the three-month deadline Mr Van Rompuy suggests.

On whether his colleague Pat Rabbitte was wise to declare that a €3.1bn Anglo debt due next March will not be paid, Mr Gilmore said the Government was determined to resolve the issue before then.

Asked if there could be unilateral non-payment or whether that would have to be agreed with the European Central Bank, he said the Government decided that the sum due last March would not be paid.

“That was agreed with the ECB and it is our intention to have issue resolved by the time it is due for payment in March,” he said.

Mr Gilmore’s remarks about the situation in Rome come amid rancour over the Budget on the Government backbenches, although he did not address that issue.

“I think what we’re seeing in Italy is what happens when there is political instability. It’s not the first time we’ve seen it,” he said.

“We’ve seen in respect of other countries and that is why it is so important that we have a stable government in Ireland. It’s been one of the strengths we have in dealing with this economic crisis,” he added.

“When you have instability it feeds into market sentiment and it feeds into the general economy of the country concerned and it feeds into Europe at a wider level.”