THE EU authorities have adopted a non-committal response to the Government’s request for measures to cut the cost of the €63 billion bank rescue.
Minister for Finance Michael Noonan took the request directly to European Central Bank president Mario Draghi yesterday and EU economics commissioner Olli Rehn but said it was too early to say whether a successful outcome was in prospect.
The Government wants to replace an expensive promissory note scheme used to recapitalise the former Anglo Irish Bank with less expensive financing, possibly via a new aid package from the European Financial Stability Facility rescue fund.
This is sensitive politically, given the strain on the EFSF’s own resources and the fact that unanimous support from euro zone countries would be required to proceed with such an initiative.
German finance minister Wolfgang Schäuble did not commit himself when he met Mr Noonan last week in Berlin, it is understood.
While Mr Rehn’s spokesman said the commission shared the Government’s objective of returning to private sovereign and bank debt markets by next year, he did not go much further than that.
“Technical talks are currently under way on ways to further strengthen the framework for the financial sector reform and on the challenges posed by the use of these promissory notes in bank recapitalisation,” the spokesman said.
“Mr Rehn indicated that this analysis should continue, in close collaboration with the Irish authorities and our troika partners.” Speaking to reporters in Brussels before leaving to meet Mr Draghi in Frankfurt, Mr Noonan was coy about his meeting with Mr Rehn.
The meeting was fine, he said. “There’s no progress that I’m reporting because it was a confidential meeting but we had a discussion and you know the agenda,” he added.
“We also reviewed the Irish programme. The troika had been in Dublin as you know but Mr Rehn hadn’t accompanied them so we had some reflections on that.” He saw the meetings yesterday as being part of a process “and we’ll move it on to the political side in the next couple of weeks.”
However, this was a medium-term strategy. “It’s coming from a point where we have always believed the promissory note arrangement in Anglo Irish Bank made by the previous government was a very expensive arrangement for the Irish taxpayer and we’re exploring the possibility of re-engineering it so that there’d be a less expensive solution,” Mr Noonan said.
“But it’s too soon to say whether we’ll be successful or not and we’re not putting any deadline on it, it’s something we see evolving over the next while.”
These discussions come as the negotiation of Europe’s new fiscal pact proceeds.
After finance ministers review the state of play, the authorities expect to circulate a fifth draft of the treaty to facilitate a final round of talks before an EU summit next Monday.
Asked whether the latest draft treaty crossed any Irish red lines, Mr Noonan said it was a matter for the Attorney General to decide whether a referendum was required.
However, he said he felt “pretty good” about the discussions at the moment.
Even though the fourth draft leaves scope for the Government to introduce a “golden rule” on debt and deficits in secondary legislation, the extent to which German chancellor Angela Merkel is willing to go along with that is unclear. She has pushed strongly for constitutional limits on debt and deficits, something that would necessitate an Irish referendum.
The authorities in Dublin and Brussels are bracing for a Supreme Court challenge in the event that the Attorney General rules that no plebiscite is required. In some circles this is seen as an inevitability.
