Wednesday 17 January 2018

We've gained ground in bid for review of bank bailout, Noonan says

Finance Minister Michael Noonan. Photo: Getty Images
Finance Minister Michael Noonan. Photo: Getty Images

Sarah Collins in Brussels

FINANCE Minister Michael Noonan has said a shift in European Central Bank policy on "burning" senior bondholders could strengthen Ireland's hand in a bid to renegotiate the bank bailout.

After meeting with ECB president Mario Draghi last evening in Frankfurt, Mr Noonan said that because most senior bondholders in Irish banks have been paid off, any shift on the issue should be "reflected in the Irish programme in some other way".

"There aren't bondholders in the Irish system now of any great value where burden sharing would be a solution, but, as I say, our position is that if there is a change in policy as the issue evolves, that change will be reflected in the Irish programme in some other way," he said.

Mr Noonan said Ireland was "making progress" in a bid to review the bank bailout after an agreement at an EU summit in June to take a second look at the Government's bank-induced debt burden.

Mr Noonan is understood to have brought up the promissory notes with Mr Draghi yesterday, but eurozone sources say that technical work on replacing the notes -- probably with an ESM bond -- has still to be finalised.

ECB president Mario Draghi raised the issue of imposing losses on senior bondholders, who are the last in line to share the cost of bank failures, at a meeting of euro finance ministers last week, in the context of banks that are "non-viable".

Ireland was prevented from imposing losses on senior bondholders in the now-defunct Anglo Irish Bank by the ECB's former president Jean-Claude Trichet.

However, a deal on senior bondholders is still some way off, as it rests on the creation of a euro banking supervisor within the ECB and on changing the rules of the European Stability Mechanism rescue fund.

The European Commission said last week that it would have a proposal on the table by October, which would then require the unanimous approval of all 16 euro finance ministers.

"It would be sufficient for us if a deal were done and it was announced because then the market would start pricing it in," Mr Noonan said.

Ireland is hoping to borrow five-year money on the international bond markets later this year. Any deal would significantly boost the prospect of achieving this.

The Government is seeking a reduction of the debt burden, first on the €31 billion in promissory notes issued to wind down Anglo, but also on the €32 billion of capital it pumped into the country's banks.

Successful

The ECB said in a statement that Mr Draghi "acknowledged the successful implementation by the Irish authorities of the adjustment programme" but that talks on a debt deal were "ongoing".

Speaking separately in Brussels, ECB executive board member Jörg Asmussen, who was key to securing Ireland a concession on its debt, said the bank would work on a solution "over the second half of the year".

He said Ireland would not need a second bailout but would be able to re-enter the markets on the back of a successful conclusion of the first.

"The troika mission is just back from Dublin, the programme is well on track, that is good news for all of us, and Ireland managed to re-enter the capital markets after two years with a short-term bond issue that was, I would say, very much successful.

"This is a good signal and so I see clear indications that the country manages to come along with the existing programme," Mr Asmussen added.

Irish Independent

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