Business Irish

Monday 18 November 2019

Bailout exit hopes after €500bn rescue fund deal sealed

Brendan Keenan, Thomas Molloy and Fionnan Sheahan

THE country's hopes for a successful exit from the bailout were significantly boosted yesterday when Europe's new €500bn rescue fund cleared a major hurdle.

After months of painstaking progress to rescue the euro, Germany's Constitutional Court finally gave the green light to the massive new bailout fund -- which will give far stronger support to countries in financial difficulty.

The fund will now be in place within weeks -- steadying investors' nerves and lifting world stock markets.

Today, Ireland will seek to borrow up to €500m when the National Treasury Management Agency sells short-term debt on the international money markets.

But more significantly, Ireland was the first country to see its borrowing costs fall for long-term debt yesterday after the ruling.

The interest rate on nine-year Irish bonds dropped to 5.39pc.

This has improved the country's chances of standing on its own two feet and fully returning to the markets when the bailout programme ends in 15 months' time.

In a further boost to the economy, proposals from the EU Commission may also pave the way for relief on our bank debts.

Finance Minister Michael Noonan is to begin another tour of EU capitals to lobby his EU counterparts for a bank deal.

The commission yesterday presented details of a new EU banking supervision system to replace purely national regulation.

At a summit in July, EU leaders agreed in principle that funds could be injected directly into banks once such a system was in place.

This would allow money to be invested in banks like AIB and Bank of Ireland -- possibly allowing the Government to get back taxpayers' money it has injected into the banks.

Taoiseach Enda Kenny spoke positively about the borrowing today by the NTMA, which he said would "dabble again in the markets for short-term money".

But Mr Kenny admitted the EU deal on reducing Ireland's bank debt, which will flow from the new fund, will take longer than expected.

EU Economics Commissioner Olli Rehn set a deadline of October for the deal, but Mr Kenny conceded it would probably take longer because the banking proposals must be agreed by governments.

"There may be some small slippage there but I expect that to be implemented in full," he said.

Deadline

Government sources said the delay in the bank-debt deal was down to waiting for an agreement to be struck on the Spanish banking sector and then making sure Ireland was treated equally.

Mr Noonan also finally admitted no deal on Ireland's bank debt was likely when Europe's finance ministers meet in Cyprus tomorrow.

Mr Noonan tried to put a brave face on the setback, telling reporters in Paris that it may be in the country's interest to extend an October deadline to reach the deal to ease the burden of the bank bailouts.

"It might be in the Irish interest if the deadline were extended somewhat," Mr Noonan said after a meeting with French counterpart Pierre Moscovici. "We're not going to be unduly concerned if it drifts a little bit."

Mr Noonan is due in Berlin and Rome today as part of a charm offensive to bolster support for an Irish banking deal.

German Finance Minister Wolfgang Schaeuble, who Mr Noonan will meet today, has already signalled his reservations about giving Ireland a better deal.

In Strasbourg, meanwhile, the European Commission made sweeping proposals to change the way the eurozone's 6,000 banks are regulated. If the commission's plan is adopted, all banks in the single currency will be supervised by the ECB as well as national regulators. The ECB would be responsible if any bank went bust.

Irish Independent

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