Funding legacy bank debt ‘still a possibility’

Ireland could still secure a retrospective recapitalisation of the domestic banks following the stress tests of the eurozone banking system scheduled for next March, according to Philip Lane, professor of economics at Trinity College Dublin.

In an interview with the French newspaper, Le Figaro, the head of the eurogroup of finance ministers, Jeroen Djisselbloem, appeared to scupper Ireland’s chances of a recapitalisation of legacy debts through the ESM. He said he did not think there would be any political support for such a move.

While there would be little support for a blanket policy because that would open up the possibility of French and Spanish banks looking for a retroactive recapitalisation from the ESM, there is still the possibility that decisions could be made on a country specific basis, said Mr Lane. “After the stress tests next year could present an opportunity. Portugal will also need refinancing, so it would not be inconsistent with that.”