Ireland fights to change banking bailout terms

14th March 2011, Comments 0 comments

Irish Finance Minister Michael Noonan urged his eurozone partners Monday to give Dublin more time to restructure its crippled banking sector, a demand Germany and France are reluctant to meet.

Noonan warned that contingency funds in a bailout Ireland received in December are now certain to need tapped as he went into talks following a heads of government summit here Friday.

He said he would raise the demand for "a longer deleveraging period" in restructuring the banking sector at a one-on-one meeting later Monday with European Central Bank chief Jean-Claude Trichet

A diplomat who sat in on Friday's talks told AFP that German Chancellor Angela Merkel, French President Nicolas Sarkozy and Dutch Prime Minister Mark Rutte told new Irish Prime Minister Enda Kenny that it would be impossible to explain to voters a re-negotiation of Ireland's bailout just four months in.

Rocked by bank failures, a property market meltdown and recession-ravaged tax revenues, Ireland's last government unveiled austerity plans to slash a huge deficit and save 15 billion euros by 2014 as part of a 67.5-billion-euro rescue deal with the EU and the International Monetary Fund.

Under the deal, 10 billion euros was to be pumped into the Irish banking sector more or less immediately, and another 25 billion euros set aside for contingency support.

Noonan said stress tests on the banks meant Dublin would not "hard figures" until the end of the month, that is, after a March 24-25 EU summit aimed at delivering a lasting response to the EU sovereign debt crisis.

Noonan, who took office after a February 25 election, warned that the amount required to plug a growing black hole in Ireland's banking system "will exceed" the 10 billion euros, adding that: "Affordability is not the issue so much as sustainability.

"So long as it's seen as part of (Ireland's) sovereign debt, and not banking (debt), it's a problem," he stressed.

Eurozone leaders refused to reduce the interest Ireland must pay on its bailout at Friday's summit unless Dublin budges on its business taxation levels, which is one of the lowest in the eurozone at 12.5 percent.

The diplomatic source said Kenny argued during the summit that dealing with the sovereign debt crisis and the banking crisis at the same time meant certain elements "should therefore be changed."

France, Germany and the Netherlands replied that "the programme was only agreed four months ago and it will be difficult to explain (to voters) it is not sustainable," the diplomatic source said.

Kenny said he was open "to doing things, even new things," the source said, but he could not alter Ireland's corporate tax rate, which led to a "vigorous" clash with Sarkozy.

In marked contrast at Friday's summit, eurozone leaders agreed to cut the interest rate charged on Greece's debt rescue to 4.2 percent from 5.2 percent and extended its repayment period to 7-1/2 years from three years.

© 2011 AFP

0 Comments To This Article