Business Irish

Wednesday 26 June 2019

Now German Chancellor Angela Merkel dampens Irish hopes of bailout cut

German Chancellor Angela Merkel
German Chancellor Angela Merkel

Thomas Molloy and Donal O'Donovan

GERMAN Chancellor Angela Merkel has dampened Irish hopes of cutting a deal to reduce our crippling bank bailout bill.

Mrs Merkel gave the clearest indication she's opposed to any agreement that would lower the cost of the €64bn bank bailout.

In her annual post-summer press conference, the 58-year-old German leader said she saw no need for changes to Ireland's bailout programme.

She added that Ireland "is on a good path".

At face value it is a blow to Finance Minister Michael Noonan's economic strategy.

That is based on convincing European leaders to reduce the interest repayments we pay on the banks' debt mountain.

Government sources said Mr Noonan will continue to push for a deal to ease the cost of rescuing the banks.

"Not everything being sought by Ireland would mean reopening the entire bailout," a Department of Finance source said last night.

Mr Noonan flew to Berlin last Thursday for talks but failed to persuade his counterparts that a deal should be struck.

He admitted at the weekend that he has no firm plan or timetable for a bank debt deal.

Taoiseach Enda Kenny last night said that "there's a process under way here".

He said: "Minister Noonan visited three cities, including Berlin. Clearly the outcome of the discussions in Cyprus are ones that I welcome and obviously ... those negotiations will continue."

But Germany, Europe's paymaster, fears that any side deal on Irish debt would worry international investors and send the wrong message to other bailout countries that their agreements are also open to renegotiation.

However, in another blow for Ireland, Ms Merkel also rejected plans for a new pan-European bank supervisor under the roof of the ECB.

The creation of a pan-European banks watchdog needs to be approved by the EU's 27 member states and aims to break the link between struggling banks and indebted governments, an interdependence that has exacerbated the three-year-old euro crisis, hitting Spain and Ireland particularly hard.

Germany fears that the European Commission's plans could leave German taxpayers on the hook to repay deposits if any of Europe's 6,000 banks fail.

Ms Merkel said the EU must not "disappoint" by moving too fast. She also dismissed the notion that struggling banks might be able to tap the eurozone's new rescue fund, the European Stability Mechanism (ESM), for direct aid before the new supervisor was up and running.

Ireland has been pushing hard for such a scheme and seemed to hint that it might be used quickly to help Irish banks.

Ms Merkel, who spoke for over an hour and a half in Berlin, appeared calm and confident.

She also voiced support for ECB president Mario Draghi's decision earlier this month to buy the bonds of stricken euro states and thereby lower their costs of borrowing on the international money markets.

That decision is also unpopular with many Germans and has been criticised by the head of the German central bank as amounting to little more than money printing.

Irish Independent

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