Saturday 27 December 2014

‘Any debt deal will cover just 8pc of our €64bn loan’

Published 06/07/2014 | 02:30

Pessimistic: Former Central Bank enforcer Peter Oakes is uncertain if Ireland will even get a deal on its bailout debt
Pessimistic: Former Central Bank enforcer Peter Oakes is uncertain if Ireland will even get a deal on its bailout debt

DESPITE the government borrowing a total of €64bn to bail out the banks, financial experts believe that only €5bn of that figure will be up for renegotiation.

The former Director of Enforcement and Financial Crime at the Central Bank of Ireland, Peter Oakes, believes that less than 8pc of the nation’s debt is negotiable, with the remainder needing to be paid in full.

Ministers have been seeking to shift some of the costs of saving Irish banks since June 2012, by attempting to pass the debt on to the European rescue fund.

The Government has been trying to base its compensation case on an EU leaders’ summit declaration from summer 2012, acknowledging that Ireland needed bank debt help so it could sustain its overall debts.

Speaking on RTE yesterday, Mr Oakes said: “If there is a debt deal to be had or a break that we can get out of this, the first question is; what is the break? It certainly cannot be the €64bn that we recapitalised the banks (with).”

“The question of the bank debt deal is how much of it could be on the table. I have spoken to a few economists and that might be around €5bn,” added Mr Oakes.

The banker said that there are a number of stumbling to blocks to any potential deal.

“Who has to be part of the debt deal? Is it all of the members of the troika? Is it the ECB? Is it the EC and the IMF?” said Mr Oakes.

“Firstly, is there a deal to be done and secondly what leverage does Ireland have?” he added.

Responding to Mr Oakes’s comments, Minister for Communications Pat Rabbitte said: “It is going to be a long haul, that is clear. The recapitalisation of the banks is going to produce a return as well that is going to have to be factored in to that as we proceed.”

Mr Rabbitte said that the Government was using the 2012 agreement to try and restructure or shift the debt on but added that not enough support was in place.

“The concept of the European Union is built on burden sharing. Here, adequate provision was not made for banking resolution,” added the minister.

Mr Oakes went on to say that attempts to renegotiate the debt loans may well prove to be unsuccessful, but he said it would be foolhardy of the Government to not at least try and restructure the loans.

“I do not know what that figure might end up being and I do not know if we will end up getting anything at all but if people are going to listen and give us an audience to have those discussions, we would be stupid not to try and take those discussions while they are available,” he said.

He also feels that Ireland was severely hampered by the way the situation was handled here, as well as international influences.

“We often talk about Ireland being impacted by international events but a lot of the events happened here. Unfortunately they arose because of the way Ireland handled the situation,” he said.

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