Securing a deal on Ireland’s €64bn bank debt is crucial to exiting the EU/IMF bailout programme. There are two strands to the negotiations. There are roughly €34bn in promissory notes covering losses in Anglo and Irish Nationwide. Under this set up, the Government is scheduled to pay €3.1bn every March until 2030. It is in talks to roll these promissory notes into a long-dated bond and is also trying to get relief on the €30bn used to bail out the pillar banks. Ireland needs support from the EU powerbrokers. But there is an election in Germany this year, where there is growing opposition to fiscal transfers. The Irish Examiner asks a range of German journalists and economists what they think of Ireland’s requests for bank debt relief
It was a brief, but telling message that Angela Merkel had for the squeezed Irish people a few weeks ago.
“Thank you, Ireland, for going down this path. It makes us all stronger,” she said after a meeting in Berlin with Taoiseach Enda Kenny.
The Germans are well aware of the progress made in Ireland in cleaning up the debris of the financial meltdown. Even the mass-market tabloid Bild went out of its way to praise the recent transformation of a crisis-ridden island into “poster country”.
Indeed, reports from Dublin have been so encouraging of late that Ireland’s still precarious bank debt of €64bn has almost disappeared from people’s notice in Germany.
“What people here talk about are the Greek disaster, and Spanish debt, because it is on the news all the time,” says Udo Lauterborn in Dusseldorf, who takes an avid interest in all things Celtic. He is the president of the local German-Irish Society, a club with 80 members.
“It may sound unfair”, he says, “but I guess most people fail to realise how much Ireland is still struggling with the burden of its banking crisis”.
Many Germans think of soup kitchens and record unemployment as worrying aspects of life in Athens, not necessarily Dublin or Cork.
Nonetheless, of all the countries being bailed out by the troika, it isIreland that Germans sympathise with most strongly. And it is the Irish that they think most merit their help.
Some 80% of Germans want Ireland to remain in the eurozone according to pollsters Infratest (compared to 74% for Spain and Italy, 68% for Portugal and 32% for Greece).
More significantly even, two out of three Germans would be happy to grant Ireland financial help, as revealed in a recent study by Hamburg University. In contrast, only 38.2% want to bail out Greece again.
There is a genuinely felt appreciation of the courage and decency in how the Irish are accepting austerity measures imposed by their government and how they are facing down their difficulties without riot and revolt.
However, its not the people who decide on burden-sharing in the eurozone, but the politicians. German finance minister Wolfgang Schäuble has made it known that he opposes any restructuring of Ireland’s crushing bank debts in retrospect by means of Europe’s rescue fund, the ESM.
He seems to fear that it may send the wrong message: If the “poster state” needs another bailout, then what chances are there for the other crisis countries?
However, the promissory notes pumped into the defunct banks seem to be another matter. The German government insists that it is for the ECB only to decide how to deal with the annual cash instalments of a €34bn debt, but diplomats say it has made “all the right noises”.
Growing exasperation in Ireland may still become a political issue, so sooner or later the problem has to be addressed. After all, everyone wants Ireland be Europe’s success story.
“At the end of the day, nothing is set in stone,” says Dorothea Schäfer, research director for financial markets at the German Institute for Economic Research in Berlin. “Especially now, after the general agreement for a eurozone bank oversight plan Ireland could apply for direct help from the ESM for its banks.
“If such means were granted Irish banks could repay the help given by the state, in whole or part of it, and the state could then pay back its liabilities to the central bank more quickly.”
This, Schäfer believes, would benefit both Ireland and the eurozone, because the recovery of Ireland’s public finances with the help of European member states would be speeded up.
To achieve its aim Ireland might have to make concessions in other matters, for example the financial transaction tax, she says: “But it could be milestone in overcoming the debt crisis in the Euro states.”
And if polls are to be trusted, the German public would hardly have any objections.
*Barbara Klimke is a journalist with Berliner Zeitung
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