Thursday 23 October 2014

Blow from Berlin as Germans say bailout pot won't pay bank debts

Published 16/10/2013 | 05:00

GERMANY has dealt a fresh blow to Ireland's hopes that Europe would pay some of the cost of bailing out the banks.

As Finance Minister Michael Noonan prepared to deliver the State's latest austerity Budget, the final one under the bailout, his German counterpart Wolfgang Schaeuble said it was unlikely that the continent's bailout pot could be used to pay for past banking debts.

Mr Noonan later said he was not worried about Mr Schaeuble's comments.

He said there was only a caretaker government in Germany at the moment as coalition negotiations continue.

"I don't know whether my friend Wolfgang Schaeuble will be the next finance minister in the next government or not," Mr Noonan joked.

However, Mr Schaeuble's remarks are the latest negative comments about Ireland to come out of Germany in recent days.

"Retroactive bank recapitalisation is not probable for the time being," Mr Schaeuble told reporters at a European Finance Ministers in Luxembourg.

"In Germany, we need a change of German legislation."

And he claimed the step would be as difficult as a "referendum in Ireland".

Yesterday's Budget was the last under the bailout and Mr Noonan travels to Strasbourg next week to meet officials from the European Commission and to Washington the following week for talks with the International Monetary Fund (IMF).

The discussions will centre on options for exiting the bailout on December 15 and whether Ireland should have some form of overdraft in place to help ease the transition to the international money markets on a full-time basis.

The minister has, in the past, indicated that the State may apply for a so-called precautionary credit line in the hope that it would never have to be used, serving simply as an insurance policy to assuage the fears of jittery investors.

BACKSTOP

But yesterday Mr Noonan gave perhaps his strongest indication yet that this may not happen, claiming the State has already built up a cash pile of €25bn.

"Ireland is fortunate that the National Treasury Management Agency (NTMA) has almost €25bn in cash balances; in effect we have a credible backstop already in place," he said. Mr Schaeuble also appeared to dismiss the need for a precautionary credit line, stating he didn't see "any necessity for this".

"We think Ireland is doing very well. Ireland did what Ireland had to do and now everything is fine," he said.

Earlier this week, Germany's second biggest party insisted the Irish Government must raise the 12.5pc corporation tax rate, while reports last week said early coalition talks between the social democratic SPD and Angela Merkel's conservative CDU were snagged on Irish issues.

While reiterating in his Budget speech the Government's commitment to the 12.5pc rate, Mr Noonan moved to assuage international concerns, including those from Germany, about Ireland's tax regime.

In reference to the recent controversy surrounding Apple's tax affairs here, the minister said Irish-registered companies cannot be 'stateless' in terms of their place of tax residency.

"Countries are increasingly competing more and more aggressively for mobile foreign direct investment," Mr Noonan said.

"I want Ireland to play fair – as we have always done – and I want Ireland to play to win."

Irish Independent

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