FINANCE Minister Michael Noonan said yesterday that he plans to "commence conversations" with European colleagues next week in Luxembourg on restructuring promissory notes used to bail out the former Anglo Irish Bank.
The Government has made a deal on the promissory notes a cornerstone of the country's economic policy. Repayments cost the State around €3.1bn a year and many economists say it will be impossible for the Government to meet its targets without some sort of arrangement to reduce the annual repayments.
Mr Noonan said he presumed "all hands are on deck dealing with Spain and Greece" but added that the Government will table a so-called technical paper on promissory notes as a policy paper once it is completed.
Experts from the commission, the ECB and the IMF have been meeting in Brussels at Mr Noonan's request to discuss possible solutions to the problem.
Any changes on the promissory notes will require agreement from all 27 EU member states, Mr Noonan told a hearing of the Oireachtas sub-committee on finance to discuss the ESM Bill.
At the committee, the minister said there is "significant support" among some European nations to fund the banks directly from the ESM so they won't appear on sovereign balance sheets but conceded "there wouldn't be lot of support for that among the triple-A rated countries".
"Of course Europe is a democracy of democracies but the people who pay the piper have a stronger say on matters like this."
Mr Noonan's comments came hours after the IMF approved a €1.4bn disbursement to Ireland but warned that the eurozone debt crisis could dampen Ireland's export-led recovery.
"Ireland's policy implementation has continued to be steadfast and ownership of the programme remains strong despite the considerable challenges the country is facing," the IMF said.
"However, as financial tensions in the euro area have resurfaced, Irish sovereign bond spreads have risen in recent months to exceed the level at the outset of the EU-IMF programme," the fund added.
Growth and jobs
The IMF said bolstering growth and job creation is essential and warned that the Government should "avoid unemployment traps in the social-payments structure".
The economy will expand 0.5pc this year compared with 0.7pc last year, it added. The fund noted that the Government has brought overspending seen earlier this year under control and praised the progress of financial sector and structural reforms.
"Approaching the halfway mark of its EU/IMF-supported programme, Ireland has once more met all programme targets," IMF official David Lipton said.
"This attests to the Irish authorities' steadfast policy implementation in the face of headwinds from renewed financial stress in the euro area, which has led to a significant rise in Ireland's bond spreads."