Top MEP backs Ireland’s bid for direct recapitalisation on bank debt

An influential member of the European Parliament has supported the Government’s efforts to get a direct recapitalisation on bank debt.

Top MEP backs Ireland’s bid for direct recapitalisation on bank debt

Economic and Monetary Affairs Committee chairperson Sharon Bowles said that as the EU economy picks up all possibilities of relief for Ireland should be explored, including the possibility of direct recapitalisation.

“I consider that some retrospective changes to make things fair should be taken. “Two issues should be kept in mind here. Firstly, the Irish taxpayer took on the extra debt for the benefit of the rest of the EU, and this has subsequently been shown to be the wrong call.

“Secondly, special consideration should be made in the Stability and Growth Pact for the part that is unfairly burdening Ireland — the provisions for this flexibility within the reformed pact do exist,” said Ms Bowles.

Following the State guarantee of the banks in September 2008, and the subsequent insistence by the ECB that no senior bondholders could be burned, €64bn has been added to the sovereign debt burden.

A delegation of MEPS were in Dublin yesterday to study the impact of the Troika bailout programme.

Their recommendations will go to the European Parliament plenary session in March. If these are adopted, then a European Parliament Initiative — which has no legal status — will support debt relief for Ireland.

Dublin MEP Gay Mitchell, a member of the delegation, said “30% of Irish debt relates to bailing out the banks. If something could be done about this, it would make a huge difference to Ireland.”

However, the most difficult part of securing a final commitment on debt reduction would be getting unanimous agreement from the Council of Ministers, he said.

ESM head Klaus Regling was also in Dublin. He said that applications for a retrospective bank recapitalisation deal through the ESM would be heard on a case-by-case basis.

This could not be done until November because the bank recap fund would not be operational before then.

But Ireland’s successful return to the markets and the current comparatively low borrowing costs were possibly a reflection of the decision not to burn senior bondholders, he said.

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