State unlikely to meet bank deal deadline, concedes Noonan

THE GOVERNMENT has said its hopes of securing a bank debt deal for Ireland in October was a “target, not a deadline”.

Minister for Finance Michael Noonan said, after briefing his French and German counterparts yesterday, that it could be in Ireland’s interests to extend the deadline in the hope of winning a better deal.

Officials said the Government remained hopeful of agreement in principle on technical matters this year, with political agreement coming after leaders agree a debt-relief deal for Spain.

“We’re quite flexible on the target date – it will take as long as it takes but we’re anxious to move things along,” said Mr Noonan in Berlin yesterday.

Earlier he said: “It would be ironic if we agreed to something before the end of October and a more advantageous arrangement was available later, after arrangements with Spain have been concluded.”

Two separate ministerial sources, both speaking on the basis of anonymity, said that such a two-stage approach has been considered and has been “in the mix”. Such an approach would allow Ireland to secure a deal in principle at an earlier stage and then be in a position to claim the same terms as Spain, once it has concluded a deal. However the sources said that no final strategy has been decided.

“It could well be possible that we could have a deal in principle and not in practice until the Spanish deal is worked out,” said a source. “We need to get the debt to GDP ratio down to allow growth and investment. We are not hung up on a date.”

Ireland has been pressing for debt relief after EU leaders agreed in June to look again at “improving the sustainability” of Ireland’s EU-IMF programme.

Taoiseach Enda Kenny joined European leaders in welcoming the backing of Germany’s constitutional court for the European Stability Mechanism (ESM) and called for its activation without delay.

The Karlsruhe court dismissed injunctions against the ESM and fiscal treaty yesterday in a preliminary ruling, saying it was “highly likely” they were compatible with Germany’s Basic Law.

The eight judges imposed some conditions on ratification but, ahead of their final ruling, cleared the way for president Joachim Gauck to sign both ESM and fiscal treaty into German law. The court’s approval buoyed the euro in trading yesterday and completes ratification of the €700 billion bailout fund.

Chancellor Angela Merkel said the ruling marked a “good day for Germany and a good day for Europe” and sent a “strong signal that Germany takes seriously its European responsibilities”.

Mr Kenny said the ruling “moves the euro zone away from a potential crisis which would have arisen, had that not been so”.

Luxembourg prime minister Jean-Claude Juncker, leader of the euro zone finance ministers, said the ESM and fiscal treaties were part of a “comprehensive strategy” to bolster fiscal sustainability in the currency bloc. Mr Juncker said he would convene the inaugural meeting of the ESM board of governors in Luxembourg on October 8th, the same day as a meeting of euro zone finance ministers.

With total capital of €700 billion, the ESM may loan up to €500 billion to crisis-hit member states in need of external funding.

Germany’s constitutional dispute centred on whether Berlin’s maximum potential liability was €190 billion, as stated in the ESM treaty. Critics disputed this, saying the bailout fund opened the door to unlimited financial demands in the future, undermining the financial sovereignty.

The constitutional court said it was happy there were adequate democratic controls in place and that the Bundestag retained autonomy over German financial affairs.