EU POWERS are pushing to dispose of a series of key questions in the debt crisis by the end of the year in an effort to minimise the risk that the issues will become embroiled in the German election campaign.
The authorities have been buoyed by the European Central Bank’s new bond-buying initiative and the go-ahead for the ESM fund from the highest German court.
They are now pressing Spain to decide quickly on bailout aid and have resolved to rush through complex legislation on a pan-European banking supervisor.
The resolution of each of these issues is crucial to Ireland’s long campaign for bank debt relief, which now appears likely to miss an October deadline for a deal.
Although German chancellor Angela Merkel does not face a general election until next September, well-placed sources say there is concern in Europe’s top echelon to minimise the danger of unfinished euro zone business being drawn into the campaign as it starts up next year.
Euro zone finance ministers and central bank governors gather this morning in Nicosia for their first talks since the summer.
The meeting comes as efforts continue to finalise the second Greek bailout. It follows a general election victory for pro-European parties in the Netherlands, further boosting the effort to stabilise the euro zone.
But doubt surrounds the intentions of the Spanish government.
While prime minister Mariano Rajoy is reluctant to apply for a new bailout package on top of the deal for the country’s stricken banks during the summer, senior euro zone officials believe the only viable option is for him seek an aid plan.
Certain officials are privately urging Spain to act by the first week in October. At the same time, there is concern that Spain may conclude that an easing of its borrowing costs in light of the ECB decision may avert the need for a full sovereign bailout. The response to this among some European officials is that any reduction in pressure is likely to be temporary.
Settlement of the Spanish question is crucial to Dublin as EU authorities are working on the basis that agreement on direct recapitalisation of Spain’s banks by the ESM must come before any similar deal for Ireland.
Similarly, the settlement of differences between the EU Commission and Germany over new bank powers for the ECB is a precondition for any recapitalisations by the ESM. Amid doubt over the prospect for an agreement in the coming weeks, EU governments have set up a dedicated working group to hammer out a deal.
EU economics commissioner Olli Rehn, ECB chief Mario Draghi and International Monetary Fund chief Christine Lagarde will give their latest assessment on Ireland to the meeting this morning before Minister for Finance Michael Noonan addresses his counterparts.
Ministers have been told in advance of the meeting that talks are ongoing on a reduction in the interest rate on the Anglo Irish Bank promissory notes, a key element of the Government’s campaign for aid.
The Nicosia meeting is in advance of a trip to Ireland by the troika next month, at which it will discuss plans for the December budget.
In a report yesterday, the Irish Fiscal Advisory Council urged the Coalition to be more ambitious in tackling the deficit in the next three years.
