Thursday 26 April 2018

Ireland 'unlikely' to get ESM help to recover cost of bailing out our banks

Germany's Finance Minister Wolfgang Schaeuble speaks with with Minister Michael Noonan in Brussels
Germany's Finance Minister Wolfgang Schaeuble speaks with with Minister Michael Noonan in Brussels

Colm Kelpie in Brussels

IRELAND is unlikely to be able to tap Europe's bailout fund to recover some of the crippling cost of bailing out the banks, the ESM's chief suggested last night.

The head of the European Stability Mechanism (ESM), Klaus Regling, appeared to rule out use of the fund just hours after eurogroup chair Jeroen Dijsselbloem said the same bailout pot would not be available to ease the cost to the banks of their stock of loss-making tracker mortgages.

Mr Regling said it was a complicated process to use the ESM to pay for historic banking debt.

"We still need a unanimous decision to create the new instrument of direct bank recapitalisation and then, as you know, the summit and eurogroup said that in exceptional cases there might be retroactive application of this instrument.

"But it doesn't seem very likely to me,'' he said following a meeting of eurozone finance ministers in Brussels last night.

And Mr Dijsselbloem, who is also the Dutch finance minister, said he didn't see scope for using the ESM to help resolve the tracker problem.

The banking sector is losing out on the cheap loans which are tied to the European Central Bank (ECB) benchmark rate, currently at a record low.

Asked if he believed there was a role for the ESM to help fund the cost to the banks of the tracker loans, Mr Dijsselbloem said no. "Ireland's moving out of the programme. You're proposing a new programme. No, I don't think it's necessary,'' he said.

Finding solutions to the tracker problem has been discussed by the Government and troika but no decision was reached during the final review mission in late October.

The comments will come as a blow to the Government as it leaves the bailout in the coming days, but there has been stiff political opposition mooted to using the ESM to pay for past banking debt, notably from Germany.

It had been speculated that the Government could have also sought an ESM guarantee for the tracker mortgages, which would have meant that they could be funded at the ECB with smaller discounts. Other options were also being looked at.

Ahead of the Eurogroup meeting yesterday, Finance Minister Michael Noonan said: "Obviously trackers are an issue but they're not an issue that will be discussed at today's meeting or in the immediate future.''

The minister said interventions that were being contemplated by the Government to resolve the tracker issue were not as apt now because "the margin between the trackers and the changing interest rate scenario is different''.

The minister also said the ESM regulations allowed for retroactive recapitalisation, but he said the details of how and when it would operate had yet to be thrashed out. He said he would take it up next year.

Mr Noonan said yesterday was an important day for Ireland.

"Having been in the bailout for three years, today is the final reporting on the 12th and final review of our programme. I'll have a few things to say to my colleagues,'' he said.

"I'll be thanking them and I'll be pointing out that we will continue to follow policies which will grow the economy and create jobs.''

Irish Independent

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