No bank debt deal until late 2014

No bank debt deal until late 2014
Finance Minister Michael Noonan

No deal can be done on Ireland’s legacy bank debt until at least the end of next year, Finance Minister Michael Noonan has revealed.

Ahead of a meeting with European finance chiefs in Brussels, the minister insisted the Government remains committed to striking a deal to restructure its bank debt – including burdens from the past.

Mr Noonan also gave assurances that taxpayers will not be forced to bail out failing banks again, saying it will come from a fund built up by the banking sector.

“It is the industry that will pay the levies to build up the fund, not the taxpayer,” Mr Noonan said.

Addressing the Joint Oireachtas Finance Committee ahead of an ECOFIN meeting on Friday, Mr Noonan admitted he would not raise questions about Ireland’s legacy debt issues in Brussels.

He insisted it was not on the agenda for the meeting and he would not have the opportunity.

When asked if the Government was still pursuing the retrospective recapitalisation if Irish banks, he said: “Oh yeah.”

But he said this could not be addressed until after the so-called banking union is in place – a mechanism in which the link between sovereign and banking debt is broken.

He said that will be “not sooner than 12 months, but some time at the back end of 2014”.

A so-called single resolution mechanism has been proposed for the banking union, which is intended as a central pot of funds for failing banks in the Euro area.

Ireland’s position will be that Europe’s permanent bailout fund, the European Stability Mechanism, should serve as a potential backstop while the pot is being built up.

Mr Noonan said this will be among discussions at the ECOFIN meeting.

He pointed out that while Ireland favours this centralised European backstop, other states may argue for a series of national funds instead.

Ireland had hoped to use its six-month term as EU president in the first half of this year to secure a deal on its €64bn debt – a burden that Irish taxpayers have been forced to shoulder.

Top EU officials, including European Council president Herman Van Rompuy and president of the European Commission Jose Manuel Barroso, previously gave their full support to Ireland’s efforts to secure a deal.

If secured, it could lead to the restructuring of its debts and ultimately lessen the financial burden on taxpayers.

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