MINISTER FOR Finance Michael Noonan said yesterday that the next priority in his campaign to ease Ireland’s bank debt burden was to secure European Central Bank support for a new rescue plan.
His remarks met with a frosty response within the ECB, which only reluctantly agreed to give its assent to the replacement of a €3.06 billion debt payment to the former Anglo Irish Bank with a Government bond.
This arrangement was made in anticipation of an agreement to restructure the €47 billion Anglo promissory note scheme with cheaper, longer loans backed by the temporary European Financial Stability Facility bailout fund or the permanent European Stability Mechanism.
Mr Noonan was in Copenhagen yesterday for meetings with his European counterparts.
He acknowledged that German support for a broader initiative to ease the bank debt burden would be important, but said the ECB’s stance would be the key element in the negotiation.
In question is whether the ECB agrees to provide low-cost funding into the “medium-term” as part of a new arrangement to replace the promissory notes, he said.
This has annoyed the ECB, it is understood, as the bank would be legally obliged in any event to accept EFSF or ESM bonds as collateral for emergency loans to Irish Bank Resolution Corporation, as Anglo is now known.
ECB executive board member Jörg Asmussen declined two opportunities last evening to respond to Mr Noonan’s remarks.
At a press conference in Copenhagen, he simply reread an ECB’s spokesman statement on the deferral.
The bank still expects that the future promissory note payments “will be served according to the schedule to which the Government has committed itself”, Mr Asmussen said.
Mr Noonan said yesterday morning that the original ECB statement had come as no surprise. “They say they expect Ireland to pay on schedule in the coming years,” he told reporters.
“But they also know that the European authorities and the IMF are preparing a policy paper where they’re exploring the possibility of an alternative to the promissory note being found which would enable Ireland to have a less onerous method of repayment and we’re moving onto that now.”
At issue in the Copenhagen talks was the combination of the ESM and EFSF to increase the euro zone’s “firewall” against the sovereign debt crisis. However, Mr Noonan said the priority for Ireland was not the strength of the EFSF. “The priority for us is a commitment from the ECB to provide us with continuing low-cost funding and that’s going to be the key piece of the negotiation.”
Mr Noonan said it was obvious the ECB would favour the use of EFSF bonds instead of promissory notes because that would improve the central bank collateral used to prop up Ireland’s banks.
“But that in itself would be of little use to Ireland unless we got the commitment to ongoing medium-term low-cost funding from the ECB.” Ireland would have no right to ESM aid if the fiscal treaty referendum was rejected.
Mr Noonan said “maybe yes, maybe no” when asked if the potential use of the ESM to restructure the banking debt might become an issue in the referendum campaign.
Asked about German scepticism about the Anglo plan, Mr Noonan said the negotiation process must be understood.
“Political support is going to be necessary. But the sequence is that an Irish request is now being developed into an EU and IMF policy paper,” he said.
“Once there’s agreement with the European authorities and the IMF and the Irish government on that policy paper then we will commence the lobbying to get political support behind a solution. So Germany is obviously very important in that sequence of events.”
