ESM ‘will not finance legacy debt’

The Government has very little prospect of tapping the European Stability Mechanism (ESM) for a recapitalisation of the country’s legacy bank debts, according to Ashoka Mody, who was part of the IMF team that implemented the bailout programme in November 2010.

The Government has pumped €64bn into the banking system following the collapse of the sector in 2008. About €30bn of this is considered legacy debt that was used to prop up Bank of Ireland, AIB and Permanent TSB.

The Government is in negotiations with the European Commission about securing some sort of recapitalisation through the ESM.