Noonan seeks to get ESM to fund banks

Finance Minister Michael Noonan is continuing efforts to get the secure recapitalisation of the pillar banks through the ESM in an effort to bring the country’s debt level down to the EU average.

“My focus is now turning to the ESM and the possibility of using it to retrospectively recapitalise the Irish banks. By this, I mean generating a return to the taxpayer from their investment in AIB, Bank of Ireland and Permanent TSB.

“The operating framework for the ESM was agreed a fortnight ago in Brussels and through tough negotiation and perseverance, we managed to secure a commitment to examine the possibility of retroactive recapitalisation on a case by case basis.

“This opens up opportunities for Ireland that I intend to fully explore and the objective is to move the Irish debt closer to the EU average,” the minister told the Financial Services Ireland annual lunch in Dublin yesterday.

Ireland’s debt-to-GDP is forecast to peak at 123% in 2014, although if growth stays at 1% over the next three years then debt could peak at 130% in 2015, according to the IMF. The Government has pumped €30bn in the three domestic banks.

The country remains on track to exit the EU/IMF bailout programme in November, said the minister. However, the Government would look to put in place supports from the troika for when it exits the programme, he added.

“The success of the NTMA earlier in the year in issuing medium and long term bonds puts is in a good position to make a full return.

“However, as we have seen in the past, we are susceptible to shocks elsewhere in the eurozone and we must ensure that the proper protection is in place to deal with such shocks. Over the last number of months, we have open initial discussions with the troika on the type of supports that may be available post programme.”

The two types of official support available following an exit from the programme include a precautionary credit line from the IMF, or the ECB’s outright monetary transactions programme.

Overall the Government continues to make progress in restoring economic stability, said the minister.

Unemployment had dropped to 13.6% and the economy was on track to meet the 3% fiscal deficit target by 2015 that was agreed with the troika.

“Difficult decisions have been taken and these have helped re-position our economy on a more sustainable, export-led growth path.

“These difficult decisions are now beginning to bear fruit, as evidenced by two successive years of modest growth.

“This has begun to have a positive impact on the labour market and as the recovery gains momentum we can expect further positive dividends, including in the labour market.”