IRISH OFFICIALS are confident that the European Union summit that starts today will deliver details on a new bank supervision system and open the way for direct recapitalisation of banks by the new European Stability Mechanism fund.
Taoiseach Enda Kenny wants EU leaders to make explicit their determination to break the link between bank and sovereign debt, a commitment made at an EU summit in June but later called into question in a joint statement by German, Dutch and Finnish finance ministers.
They said the ESM should only bear losses resulting from future bank bailouts, undermining Irish hopes that the ESM could take on legacy debts and reduce Ireland’s €64 billion bank bailout bill.
Minister of State for European Affairs Lucinda Creighton insisted yesterday, however, that everything was on track for direct bank recapitalisation from the ESM, even though “the process is perhaps slower than we would like”.
“I expect leaders will agree on a system for bank supervision and will reaffirm their decision in respect of direct recapitalisation of banks by the ESM. They are the two key decisions that we need this week at the summit,” she told The Irish Times in Bucharest.
“We always understood that the process had to happen and a supervisory mechanism put in place,” she said at a congress of the European People’s Party, to which Fine Gael belongs.
“It will happen, as you will see from the conclusions to be agreed by the EU heads of state and government this week. They will move to agree on a bank supervisory mechanism, and that will create the space for direct recapitalisation of banks.”
On whether the ESM could take on legacy debts like Ireland’s, Ms Creighton said: “Nothing is excluded. Like in all negotiations we have to work out the details.” Once EU leaders had agreed on a plan for supervision, finance ministers would resolve how banks could be recapitalised, she said.
Taoiseach Enda Kenny, arriving last night at the EPP gathering, stressed that EU leaders had made an “unequivocal” decision in June. He pledged to reiterate to leaders in Bucharest – including Chancellor Angela Merkel – the importance of fulfilling those commitments. But he would not be drawn on whether a bank supervisory body would be operational by 2013, as planned.
“For us, the most important thing is to get it right,” he said. “The intention is to have the supervisory element in place by January 1st, and clearly, the quicker the better.”
