Ministers concede difficulties with ECB over deal on promissory notes

Senior Government Ministers have publicly admitted to difficulties in talks with the European Central Bank on resolving the promissory notes issue.

As Tánaiste Eamon Gilmore made a stark warning that failure to strike a deal with the ECB on the promissory note would have a “potentially catastrophic effect on Ireland”, his ministerial colleague Leo Varadkar conceded that the Coalition has to change some of its proposals to avoid punitively high repayments on the promissory note for the former Anglo Irish Bank.

The Government must pay €3.1 billion each March until 2023 to cover losses at the failed bank.

‘No rejection’

Responding to reports that the ECB had rejected Ireland’s proposal for a longer repayment schedule, Mr Varakdar disputed this was the case.

“There was no rejection. There was no breakdown. There are issues that need to be changed. And issues that need to be agreed on,” he said on RTÉ’s The Week in Politics.

Setting out the nature of the talks, he said: “There is agreement in a lot of areas, but there are a number of issues outstanding and some of those issues are very difficult . . . We need to work on them but we are still very hopeful of getting a resolution.”

The ECB told The Irish Times yesterday that it was “premature” to refer to any outcome and that talks on this issue were ongoing.

Mr Gilmore told a gathering of EU and Latin American leaders meeting in Santiago that Ireland’s expected exit from the bailout programme this year was dependent on sealing an agreement to lower the country’s debt burden.

‘Shown solidarity’

Speaking before an audience which included German chancellor Angela Merkel, the Tánaiste said that by “shouldering a great burden of debt” Ireland had “shown solidarity with Europe when the risk of contagion was high” and a deal on lowering the burden now required “a greater reliance on that solidarity that underpins the union”.

The basis of the reports this weekend is that the solution preferred by Ireland – converting the promissory note into long-term bonds – amounted to “monetary financing” by the ECB, which is outlawed by article 123 of the EU treaty.