Noonan: Government may not use ESM to cover rescue cost of AIB and Bank of Ireland
THE Government may not use the EU’s bailout fund to cover the cost of rescuing Bank of Ireland and AIB, even though European finance ministers approved such a deal in principle last night.
Eurozone finance ministers decided on Thursday that the European Stability Mechanism (ESM) could be used to “retroactively” pay for past bailouts such as for the two pillar banks.
The ESM will decide on a case by case basis whether the fund will be used for bailouts such as Ireland, keeping the Government’s hopes alive that at least part of the €25bn it pumped into the two banks could be recouped.
Speaking in Luxembourg this morning however, finance minister Michael Noonan said the Government had yet to decide if it would apply to use the ESM.
“The Irish taxpayer put a lot of money into Bank of Ireland and AIB. There is a possibility now that in the future we can retrieve some of that money through the ESM but it is a complicated structure.
“Both banks have forecast they will be in profit next year and looking at their balance sheets I think the forecasts will be accurate.
“That means we will have two profitable banks in a growing economy next year and obviously that changes values of banks and it changes the arithmetic.
“It also gives us other options because profitable banks in growing economies have a value in the market so we are not solely tied to and ESM option any longer but it is important to have that option and we do have it after yesterday,” he added.
Mr Noonan was speaking as he arrived at today’s meeting of European finance ministers. The Ecofin, as the group are known, will discuss mechanisms for winding up a failing bank, known as bank resolution, with negotiations expected to run into the night.