Kenny insists bank debt deal stands despite Merkel warning
TAOISEACH Enda Kenny says the decision of EU leaders in June to separate bank debt and sovereign debt, including giving Ireland a bank debt deal, still stands.
Mr Kenny said the EU summit was a "clear affirmation" of the commitment to use the new EU bailout fund to put money into banks.
But German Chancellor Angela Merkel cast huge doubt over the use of the new EU bailout pot for back-dated injection of funds into the banks.
The Chancellor's strong statement would have huge implications for Ireland as the Government seeks to pin down a bank debt deal.
The German leader specifically said banks could not be retrospectively recapitalised via the euro zone's permanent bailout fund once a European-wide bank watchdog is in place.
"There will not be any back-dated direct recapitalisation. If recapitalisation is possible, it will only be possible for the future so I think that when the banking supervisor is in place we won't have any more problems with the Spanish banks, at least I hope not," she said at the end of a summit of EU leaders in Brussels.
The Taoiseach said the outcome of the EU summit was positive and there was progress made through the agreement to set up a new eurozone banking supervisor.
He said he did put the decision of June 29 on Ireland's bank debt on the record of the summit.
"That was accepted by everybody and that was very clear," he said.
Mr Kenny said work was ongoing on Ireland's banking debt on two fronts.
"The Government are also continuing to work with our colleagues to improve the understanding of the sustainability of debt that we agreed in June.
"As I said before, these things are very complex and sensitive and I am not going to go into the detail of them here," he added.
"You are also aware that separate from the break between the sovereign and the bank that discussions are going on in regard to the promissory note with the ECB," he added.
But Ms Merkel also said banks could also only be directly recapitalised via the European Stability Mechanism (ESM) once a fund which banks pay into had been set up.