Taoiseach tight-lipped on Cyprus plan to burn bondholders

Taoiseach Enda Kenny declined to cast judgment on talks to impose losses on senior bondholders in Cypriot banks as part of the country's imminent bailout, a path barred to Ireland by the EU authorities.

Arriving for last night's Eu ropean summit in Brussels, Mr Kenny said he had spoken with Cypriot president Nicos Anastasiades but that the bailout would not be discussed until an emergency meeting tonight of euro zone finance ministers.

“I’m not going to comment in advance of the euro group meeting on this. Clearly there are a number of considerations to be taken into account in the case of Cyprus,” the Taoiseach said.

The prospect of senior bank bondholders bearing costs in the rescue of Cyprus is highly sensitive for the Government, given the Europe an Central Bank's repeated insistence on senior bondholders in the former Anglo Irish Bank being fully repaid.

Fresh questions on Anglo
A change of policy for Cyprus would raise fresh questions for the Government and the EU authorities over the merits of repaying Anglo's debts in full.

However, such a move might give Mr Kenny additional leverage as he campaigns for further concessions to ease Ireland’s banking debt and the cost of the EU/IMF programme.

Mr Kenny said the prime focus of the summit would be on the effort to foster economic growth, while EU economics commissioner Olli Rehn said Ireland’s successful sale of €5 billion in long-term debt was excellent news.

“I see this as a further sign of the significant improvement in market sentiment towards Ireland, which is the result of the strong implementation and ownership of the programme by the Irish authorities,” Mr Rehn said.

“To my mind it is very concrete evidence that consistent fiscal consolidation combined with bold structural reforms does pay off, and this follows the recent welcome signs of the beginnings of a turnaround in the Irish labour market in terms of job creation.”

The summit comes amid tension between countries, such as France, which want to ease the pace of fiscal retrenchment and those like Germany, which argue there should be no relaxation of budgetary strictures.

Saying further measures to deepen the single market could help promote economic growth and jobs, Mr Kenny said no European leader could be happy with the situation that 26 million people were out of work.

“Whether you call it austerity, fiscal discipline or fiscal correction, it means change and it means difficulty for a great number of people,” he said.