THE POTENTIAL for renegotiating some of the terms of the EU-IMF bailout was discussed when the Fine Gael leader Enda Kenny and finance spokesman Michael Noonan met president of the European Commission José Manuel Barroso in Brussels last night.
They said Mr Barroso had given them a warm welcome but stressed that a formal mandate from the Irish people was needed before any “negotiations” on the terms of Ireland’s EU-IMF bailout could begin.
In a meeting that lasted over an hour, Mr Kenny stressed his party’s desire to renegotiate the borrowing terms of the recent €85 billion lending package, adding he would not be opposed to introducing new laws or seeking an Irish constitutional change so that excessive government spending was prevented in the future.
Germany currently has a constitutional “debt-brake” to prevent runaway budgetary deficits, with Chancellor Angela Merkel keen to see similar such mechanisms in other EU member states.
“President Barroso was very strongly in support of Ireland, as he always has been, and obviously the commission must continue to deal with the Government in situ until the people decide otherwise at the election,” Mr Kenny told journalists after the meeting.
The statement comes just days after former taoiseach and Fine Gael leader John Bruton sent a letter to Mr Barroso, complaining that the Portuguese politician had failed to acknowledge Europe’s role in creating the Irish crisis when speaking to MEPs in a recent debate.
Mr Kenny acknowledged that any renegotiation of Ireland’s roughly 6 per cent borrowing rate was likely to take place as part of a broader discussion on EU lending.
“Obviously there are difficulties in other European countries and we understand that this requires European co-operation and European support.”
Reform of the EU’s principle lending fund, the European Financial Stability Facility (EFSF), based in Luxembourg, is among the key subjects to be discussed at EU summits next week and in late March.
Ireland’s €85 billion loan package consists of €17.7 billion from the EFSF, together with €22.5 billion from a separate EU bailout fund and a further €22.5 billion from the IMF.
Mr Noonan said he was aware that countries such as Germany were likely to demand further budgetary restrictions in return for reduced borrowing rates under the EU-IMF package.
“Our side of the conversation [with Barroso] was that we were aware that there was a desire in Europe to control, in law, the ability of governments so that they would not borrow recklessly again. So a new fiscal rule would have to be implemented and these could be implemented by statue in the first instance by establishing in European countries legal fiscal councils. And FG are totally committed to the establishment of such a council.”
He added that holders of bonds in Irish banks that were not covered by the Government guarantee might well be forced to accept reduced returns.
“Ireland would have to honour in full all its sovereign debt and all senior and junior bank debt that was under guarantee. So the only element in question is the €15 billion or so which is non-guaranteed senior bank debt. We have always argued that there should be the possibility for burden sharing on that.
“We also stressed that we couldn’t approach it on a bilateral basis, it would have to be in the context of Europe as a whole.”
After the meeting, an EU official stressed that Mr Barroso was not going to be drawn on the validity of the Fine Gael position.