THE European Commission has confirmed that a deal to shift the burden of Ireland’s bank debt off the government’s books will be ready by October this year.
The deal, reached after a marathon nine-hour meeting, involves the eurozone’s future rescue fund, the European Stability Mechanism, taking over Irish taxpayers’ €32 billion euro stake in the banks.
EU economics chief Olli Rehn said early today that the Commission would publish proposals in September and aim to get the agreement of Ireland's 16 eurozone partners by October.
“The Commission will take forward technical work on improving the sustainability of Ireland’s well-performing adjustment programme, in particular as regards its financial sector, together with our partners in the troika,” Mr Rehn said after the meeting with with eurozone finance ministers in Brussels.
The October deadline enjoyed unanimous support amongst finance ministers at the meeting, Mr Rehn confirmed.
“That’s very positive,” Mr Rehn added. “It’s positive for Ireland, its chances of succeeding in its reform programme, and thus it’s positive for the whole of Europe.”
“We all know the issues and challenges as regards the Irish financial system and debt sustainability,” Mr Rehn said.
Restructuring talks are already underway on €31 billion in promissory notes issued by the government in 2010 to spread the cost of bailing out the former Anglo Irish Bank.
However, any deal involving the ESM will be conditional on the setting up of a euro-level bank supervisor, most likely within the European Central Bank.
A proposal from the Commission is due in September, but the ECB is unlikely to be able to take over supervisory duties before next year.
The Irish deal hinged on decisions taken for Spain, which was last night granted a €30 billion advance on a €100 billion rescue loan.
The money will be funnelled to Spain’s ailing banks via the state’s Fund for Orderly Bank Restructuring and is repayable over 15 years at lower than market rates.
The loan will add to Spain’s debt levels until the ESM fund is launched and a new banking supervisor set up. The ESM will then assume those debts.
The European Central Bank insisted at a recent EU summit that any deal done for Spain be followed by similar concessions for Ireland, as long as the government sticks to agreed budget cuts and public sector and labour market reforms.
Minister for Finance Michael Noonan said Ireland was keen to do a deal before budget day in December, which he said would convince the IMF that the government can manage its debts and smooth Ireland’s return to financial markets next year.
“That would suit our domestic agenda and it would also suit the IMF timeframe of having to adjudicate on whether we’re funded for 12 months ahead or not, and they need to do that some time in the autumn,” Mr Noonan said yesterday [MON] ahead of the talks.
He refused to confirm how much of the bank debt Ireland was seeking to shift, but said the government would be “ambitious in our ask”.