Ireland confirmed as equal in debt deal

EURO GROUP head Jean-Claude Juncker has confirmed that the terms of any banking debt deal for Spain or Italy will have to apply retrospectively to Ireland and other bailout recipients.

Meanwhile, Klaus Regling, the head of the European Financial Stability Facility who was confirmed last week as future head of the permanent European Stability Mechanism (ESM) bailout fund, has said that without euro zone bailouts Ireland “would no longer be in the currency union”.

Days after he was elected for another term as euro group chief, Mr Juncker, Luxembourg’s prime minister, said he still favours German colleague Wolfgang Schäuble succeeding him – and sooner rather than later.

In this morning’s Spiegel he insisted that all euro zone countries in need of external financial assistance be treated equally. “That is why [last month’s] summit conclusions contain the sentence that countries in a comparable situation have to be treated equally; it is a principle on which I place great value,” said Mr Juncker.

“Portugal and Ireland are meeting the European conditions in a model fashion; both countries have achieved great successes in balancing their budgets. Thus they have a right that the rules apply to them as the others – as long as their situation is comparable to the others’.”

He said Germany’s delay in ratifying the ESM, because of a constitutional court case, was “not helpful” but that the court’s judges “knew what is the maximum time frame in which we have to move”.

Mr Juncker said he hoped to hand over the euro group reins in 2013 but was critical of reports that Berlin and Paris had agreed a job-share between German and French finance ministers.

“Decisions in Europe can only come about when France and Germany agree but it’s also true that solo runs don’t make one popular with the other member states,” he said. In a dig at the new French finance minister, Pierre Moscovici, he added: “To be clear: in my view Schäuble meets all conditions to become a euro group head.”

Meanwhile, the future head of the ESM has confirmed banking debt bought up by the permanent bailout fund will not in future count as sovereign debt. “If there really is a banking regulator through the European Central Bank, then we have the possibility of giving credit directly to banks and not, as present, through the states,” Mr Regling told the newspaper Welt am Sonntag. “Then the state is freed from the liability.”

His spokesman dismissed suggestions that this position put the German-born official at odds with Berlin, pointing out that Mr Regling was referring to the time after a pan-European banking regulator was in place.

An agreement – by next year at the earliest – comes too late for Spain. Once it agrees a memorandum of understanding with its partners, €30 billion could be disbursed by the end of July to Madrid’s bank restructuring fund.

Madrid hoped for bailouts to go directly to financial institutions and not count as debt but this was blocked by Berlin and others.