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Saturday 21 October 2017

Draghi says no new debt deal despite treaty vote

A woman walks down a street in Athens in beleaguered Greece where an election is due on June 17. Photo: Reuters
A woman walks down a street in Athens in beleaguered Greece where an election is due on June 17. Photo: Reuters

Charlie Weston, Thomas Molloy and Fionnan Sheahan

Taoiseach Enda Kenny was dealt another embarrassing blow to his claim that a bank debt deal can be secured on the back of passing the EU fiscal treaty referendum.

In the wake of German Chancellor Angela Merkel's dismissal of a deal, the European Central Bank president also appeared to rule out any relief on debt burden on the back of the Yes vote.

Mario Draghi welcomed the passing of the referendum but played down the possibility of the vote being used as a lever to secure a better deal.

"I don't think there was any grounds for a quid-pro-quo," he said bluntly.

Mr Draghi's comments came as Mr Kenny came under intense pressure to say what response he got from EU leaders to his demand for debt deal.

The Taoiseach is writing to EU leaders asking for a solution to the banking crisis, including a bank debt deal for Ireland.

Refusal

But he repeatedly refused to say if German Chancellor Angela Merkel supported his view Ireland must get a new deal on bank debt.

Mr Kenny said any decision on bank debt will be made by EU leaders and not officials.

He attempted to brush aside comments from German officials saying Ireland will get no new deal.

Mr Kenny said he would bring up the issue of bank debt at the EU summit at the end of the month.

He said he was writing to all of the leaders of the eurozone calling for a political solution to the banking crisis impacting the single currency.

Mr Draghi praised Ireland and said the efforts at cutting government spending should mean the country returns to the bond markets sooner than previously planned.

But he brushed aside suggestions that Ireland should now have an easing of the burden on the country's taxpayers after last week's referendum result.

Mr Kenny said the result of the referendum showed that "the Irish people consider fiscal consolidation, and fiscal stability, a basic pillar for growth and for further European integration".

"It's really a testimony of their responsibility and for this they should be complimented," he said.

Speaking after the ECB's governing council June meeting in Frankfurt, Mr Draghi said he did not believe there was "any ground or statement for a quid-pro-quo" linking ratification of the deal to an arrangement allowing Ireland to restructure its banking debts.

"I think decisions ought to be taken for that they are," he said, "and that's what we see."

Since the passing of the referendum, expectations have been raised by the Taoiseach and senior ministers that the country may be able to use the result to negotiate a better bailout deal.

Asked about the European Commission's forecast for Ireland's economic growth, Mr Draghi commented that Ireland had already made "substantial" progress in both its fiscal consolidation and in restructuring its banking sector.

"We already see the signs," the eurozone banking boss said.

"You see spreads going down for Ireland, probably much more than any other country.

"If one says that Ireland continues in these efforts, the return to market access is not a far distant perspective. It could actually be much closer than we all expected, I would say, nine months ago."

The meeting of the bank's governors had earlier decided to leave the ECB's main interest rates unchanged at its monthly meeting in Frankfurt -- although the decision was not unanimous.

It had been speculated that the bank may have cut its rates by 0.25pc to stimulate economic activity within the eurozone.

Mr Draghi had earlier said economic growth in the eurozone remained "weak" with "increased downside risk", and called on EU leaders to consider their policies towards fiscal integration -- hinting that the bank was not willing to take major policy decisions ahead of the meeting of the European Council in three weeks. But he said that the ECB now stood "ready to act" when it was appropriate to do so.

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