Tánaiste urges EU to break sovereign and bank debt link

TÁNAISTE EAMON Gilmore has urged EU leaders to break the link between sovereign and bank debt, saying momentum must not be lost in the battle against the crisis in the euro zone.

Amid concern in Dublin at the slow pace of talks on a debt relief deal, Mr Gilmore said the Government needs to “see progress” at an EU summit next month.

The summit is the first since EU leaders agreed in June to review Ireland’s situation.

“I would be concerned if there were backsliding,” Mr Gilmore told reporters yesterday in Brussels.

“I think what really we need to see in October is a clear signal that the June decisions are being implemented.”

Separate talks continue with the European Central Bank to recast the Anglo Irish Bank promissory note scheme, but it is still unclear whether an agreement is within the Government’s grasp.

“Progress is being made but I mean as we’ve consistently done in these discussions we don’t talk about the detail of what is being discussed until we have landed an agreement,” Mr Gilmore said of the Government’s engagements with the ECB.

EU leaders resolved in June to give powers to the European Stability Mechanism to make direct capital infusions in stricken banks, a decision that opened up the prospect of the bailout fund taking equity stakes in AIB, Bank of Ireland and Permanent TSB.

No breakthrough on this front is imminent, however, and technical work on this question and others is still ongoing.

The leaders said direct ESM aid for banks will be conditional on the creation of a euro zone bank supervisor within the aegis of the European Central Bank, something which was supposed to be put in place by the end of the year. However, Germany and its allies have played for time in the negotiation amid divisions over the scope and timing of the initiative.

“I would be concerned if there were any going back from the commitments that were made in June,” Mr Gilmore said.

“I think it’s fair to say that the markets had priced in the implementation of the June decisions. Therefore, I think it’s important for that confidence to be maintained that there are very clear signals coming out that the June decisions are being implemented.”

European sources said Irish officials are pressing hard for a swift resolution but all signs suggest the October deadline set by finance ministers during the summer will be missed.

The European sources said Irish officials have repeatedly stressed the efforts made by the Government to tackle its financial problems and made the case that Ireland remains the best prospect for a successful outcome from the bailout policy.

“We consider the October council meeting is very important to follow through on June. I mean the decisions that were made in June in our view were very important both for Europe and indeed for Ireland,” Mr Gilmore said.

He was speaking on the sidelines of an EU meeting at which foreign ministers and ministers for Europe discussed the next European budget.

It was clear, Mr Gilmore said, that member states were divided over the budget.

He insisted, however, that it was realistic to anticipate a deal could be struck at a special summit meeting in November.

“We continue to support the Cypriot presidency to that end but I do have to say that the positions of member states are quite far apart at this stage on it both in relation to the size of the budget and in relation to its possible composition,” he said.