TAOISEACH ENDA Kenny is campaigning to ensure Ireland’s recovery effort is not swept off course by moves to impose greater losses on Greek bondholders in its second bailout.
As talks gather pace on a new European plan to confront the debt crisis, Mr Kenny said it must be made clear that arrangements made for Greece in the coming days are unique to that country.
EU leaders struck a deal in July in which private Greek investors were urged to take a “voluntary” 21 per cent loss on their bonds. At a summit on Sunday week, they are expected to discuss whether the loss should be increased to 50 per cent to bring Greek debt back to a “sustainable” level.
Mr Kenny’s remarks reflect concern that a debt restructuring process of this nature for Greece could fuel speculation in markets that other bailout recipients such as Ireland might follow suit.
Any such speculation would seriously hamper the State’s effort to regain access to funding on private debt markets.
The Taoiseach was speaking in Brussels yesterday morning after a 45-minute meeting with European Commission president José Manuel Barroso, who praised the “good, steady progress” made by Ireland in its execution of the rescue plan. “There are clear signs that this is paying off: interest rates have come down and growth has resumed,” he said.
Separately, Reuters reported that the Fitch credit rating agency says it believes it will be possible for Ireland to return to private debt markets as planned if the crisis does not worsen appreciably.
“Assuming no material deterioration of the euro zone crisis, I think it is feasible for Ireland to be back in the markets in 2013, if they continue to do the right things and are able to make progress on deficit reduction,” said Fitch debt analyst Tony Stringer.
“If they continue to make progress and regain market access their rating could improve over the medium term,” he added. Mr Barroso has asked EU leaders to hasten the introduction of the European Stability Mechanism, the permanent bailout fund which will replace the temporary fund known as the European Financial Stability Facility.
It is a condition of ESM aid that private creditors are required to bear rescue costs. Therefore, the fund’s introduction in mid-2012 instead of mid-2013 would bring forward the date at which debt restructuring arrangements move beyond the realm of the Greek rescue.
“I did make the point that in respect of the ESM that we don’t have any objection to an early introduction of that,” Mr Kenny told reporters in Brussels.
“But it would want to be made perfectly clear that PSI [private-sector involvement] is an issue of concern, not only to Ireland but also to other countries.”
After their meeting Mr Kenny and Mr Barroso each made short statements to journalists but they did not take any questions.
The Taoiseach said he was happy to report that Ireland was heading in the right direction. The execution of Ireland’s rescue plan meant the decisions taken in the crisis by EU leaders “can actually work”, Mr Kenny said.
“I look forward to the European Council where I can argue from a point of view of some strength, holding out Ireland as an example, that when the decisions are taken at the European level, and if they are followed through by government working to those directions, they are actually successful.”
Mr Barroso said he and Mr Kenny shared the same views about the future of Europe, saying they exchanged views on how to have a “community-based” approach to future economic governance.