Banks deal won't ease the Budget -- Noonan

Jane Last

THE EU deal on bank debt will make no difference to December's Budget, said Finance Minister Michael Noonan.

While admitting a reduction in interest on the debt will improve the budgetary position for future years, the minister insisted it will have no impact on December's Budget.

The minister stressed that the deal would not have any effect on the next Budget as the measures were unlikely to be in place in time.

He added it was impossible to say what the deal will be worth to Ireland, saying the most significant thing was that Europe had switched its policy position, and so broken the vicious circle between bank debt and sovereign debt.

Details of the scheme to transfer bank debts away from the Irish sovereign balance sheet will now be worked out by the end of the year.

In addition to reducing costs for bailed-out countries, the deal will create a single supervisory body for euro zone banks.

The agreement, said the minister, represented a "seismic shift" in EU policy and that was "more important now more than ever because that positions us to get the additional help that is signalled in this policy statement".

During the negotiations, Italy and Spain blocked any agreement on a growth compact unless they secured concession on reducing their borrowing costs, and it was this move which benefited Ireland.

The bank debt will still have to be repaid, but over a much longer time frame.