Ministers give Greece next tranche of EU loan
Some of Ireland’s most senior finance officials and the Financial Regulator Matthew Elderfield were in Brussels with Finance Minister Michael Noonan, who said on his way into the meeting, “Naturally enough we’re watching Ireland’s interests all the time”.
The Government is hoping to cut the cost of the €30bn worth of promissory notes on Anglo Irish Bank by borrowing from the EFSF to buy back the notes that, under the current arrangement, are estimated to cost the country €82bn by the time they are finally paid off in 2030.
There was little sign of agreement on the major EU issue of how to extend the value of the rescue fund, the European Financial Stability Facility, with France appearing increasingly isolated.
The solution is unlikely to be found until a meeting late on Saturday between German Chancellor Angela Merkel, French President Nicolas Sarkozy, and the presidents of the European Commission and Council, Jose Manuel Barroso and Herman Van Rompuy.
But a final agreement will not happen until Wednesday to give Ms Merkel the opportunity to get approval from the Bundestag’s budget committee.
The finance ministers are to be joined this morning by their colleagues from the non-euro countries and all 27 will try to reach agreement on the issue of recapitalising the banks.
It is expected they will agree with the assessment by the European Banking Authority of a figure of 9% recapitalisation but the details were still to be worked out. Mr Noonan said, “We have to decide what the ratio is, whether it’s 7, 8 or 9%”.
This was complicated by the fact that “it’s all interrelated since the other major issue, the private sector involvement in Greek debt will have a kick-back effect into the recapitalisation of the bank and that is also connected to the possibility of creating a firewall”.
He added “It’s not possible to take one of these agenda items on their own because they’re all moving parts of the same solution”.
The issue of private sector involvement in the second bailout deal for Greece appeared to be settling down at around 50%, which it was estimated would bring their debt to around the same level as Italy at 120%.
The higher haircut of 60% would reduce it to an even more sustainable level of 110% but this would create additional difficulties for the banks holding the debt, including French banks.
The deals also involve the Institute for International Finance, representing the banking sector and its head, Josef Ackermann, head of Deutsche Bank, together with representatives of several of Europe’s financial institutions. Ten of the top such institutions say they support the German proposal that the EFSF partially insure eurozone sovereign bonds.
But the big issue is how to leverage the EFSF and, according to Austrian Finance Minister Maria Fekter, the French preference of turning it into a bank that could access ECB funds was “long off the table by now”.
There appeared to be greater agreement around the idea of using around 20% of the fund to insure against losses of those buying bonds of stressed countries — which could increase the firepower of the fund considerably.
The finance ministers meeting ended earlier than expected with Mr Noonan saying they had “touched on everything”, but the indications were that they will leave the leverage issue to the leaders on Sunday.
