MINISTER FOR Finance Michael Noonan will ask the European authorities today to examine radical new measures to ease the cost of the bank bailouts on the State.
Mr Noonan will meet European Central Bank (ECB) chief Jean-Claude Trichet and EU economics commissioner Olli Rehn in Brussels ahead of his first encounter tonight with EU finance ministers. Only two days after a dispute over corporate tax led euro zone leaders to refuse an interest rate cut on Irish bailout loans, he will press the case for a working group to be set up to examine how they might take on a further burden from Ireland’s bank bailout.
The Minister is concerned that bank stress tests later this month may reveal a requirement for additional capital, making it impossible for Ireland to borrow again in the bond markets if the entire bill for the banks was met by the State.
A senior Government source said there was support for Mr Noonan’s proposal within the European Commission and the IMF.
Although debate on the overhaul of the euro zone bailout fund was largely concluded at a summit on Friday, Mr Noonan wants the fund to be given power to provide insurance cover to bond investors in Irish banks. The objective is to wean the banks off ECB support.
To lessen the load on the State, the Government source suggested that the bailout fund would become a provider of capital to the banks in the last resort. The debate is urgent, as EU leaders hope to finalise a comprehensive package to reinforce the fund at a summit next week.
“If there isn’t a credible solution in the next fortnight, there’s a risk that Ireland will be back again in a year’s time and there’ll be a new crisis for the union,” the Government source said.
Plans are in train for Mr Kenny to speak to Dr Merkel and Mr Trichet before the next EU summit on Thursday week.
Before leaving for Brussels last night, Mr Noonan said Ireland would not allow any dilution of its corporate tax regime.
Germany and France want corporate tax changes in return for lower interest on bailout loans, but Taoiseach Enda Kenny said it would represent “a massive breach of trust” if he were to yield. “We will not renege upon our responsibilities . . . but we need some flexibility from our European colleagues and I expect we’ll get that.”