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Thursday 18 September 2014

Lack of bailout deal 'fuels extremist parties'

Caroline Crawford, Donal O'Donovan, Colm Kelpie

Published 17/06/2014 | 02:30

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Flags of European Union member states fly in front of the European Parliament building in Strasbourg
Flags of European Union member states fly in front of the European Parliament building in Strasbourg

IRELAND must get a deal on the €64bn cost of bailing out the banks in order to stem the rise of "very extreme parties", Labour leadership contender Joan Burton warned.

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Getting a deal would be a "win-win" for Ireland and the EU because it would get more people back to work and help spread economic growth across the continent, she argued.

Ministers have been seeking the deal to shift at least some of the cost of saving banks here on to the European rescue fund since June 2012.

But an unnamed senior eurozone source was last night quoted as saying it was "extremely unlikely" Ireland would get the so-called "retroactive" deal from Europe's bailout pot, the European Stability Mechanism (ESM).

Ms Burton warned: "I think it can't have escaped people's attention that right across Europe there was a heavy rate of voting for very extreme parties, some on the left and some on the right, and I don't think that's in the best interest of the kind of EU that I would envisage.

"I haven't had an opportunity to meet those officials myself, but if I did that would be my message."

She said that the case for Ireland still needed to be pressed. "Getting more debt relief for Ireland's debt . . . is a win-win for the EU, because if countries like Ireland get back on their feet, get more people back at work, you have a much more vibrant EU economy here and throughout the EU."

Meanwhile, the Government insisted that the deal to shift part of the cost of bailing out Irish banks on to Europe was still on the cards.

An agreement reached last week confirms that the option of so-called "retroactive recapitalisation" remains a possibility. "Nothing has changed in the last week," the Department of Finance said last night in a statement.

A deal for Ireland is still being pursued, they claimed.

"The Minister for Finance and his government colleagues ensure that Ireland's case for retrospective direct recapitalisation is made at all levels as appropriate," the Department of Finance said.

In summer 2012, eurozone heads of government declared it was "imperative to break the vicious circle between banks and sovereigns", and called Ireland a "special case".

Hailed

It was hailed by the Government as a major breakthrough that cleared the way for European money to flow into the banks and Irish taxpayers' money to come back out.

But pinning down a deal, or even opening formal negotiations about a possible agreement, has proved elusive.

Last night, a European official told the Irish Independent that consensus was required among all eurozone countries before Ireland could get a debt deal, saying that that degree of agreement was unlikely.

"Perhaps now the unpleasant reality of this not being a very likely option is perhaps more obvious," the source said.

Last week, all 18 members of the eurozone, including Ireland, reached an agreement which means the ESM "firewall" will be available to provide direct aid to banks if needed by November. The timing means new power to bailout lenders will be ready when the European Central Bank takes over supervision of the bank sector at the end of the year.

Irish Independent

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