No vote a ‘major setback’ for bank debt deal

Efforts to secure a better deal on the country’s bank debt would suffer a major setback if voters reject the EU fiscal compact, the Government has claimed.

Senior ministers have hit back at attempts by businessman Declan Ganley to link a no vote in the referendum with an easing of bank debt.

Simon Coveney, director of Fine Gael’s referendum campaign, said rejecting the treaty would have exactly the opposite effect, weakening Ireland’s ability to get a better deal on debt owed by bailed-out banks.

A rejection on May 31 would be a “double negative for Ireland”, the agriculture minister said, by “weakening our negotiating capacity on other issues and rejecting a stability treaty that is good for Ireland’s future”.

As the latest poll showed a decisive swing in favour of a yes vote, Mr Ganley added his voice to the no campaign, describing the treaty as “a formula that totally ignores the bank debt burden that we have no moral responsibility for”.

Tánaiste and Foreign Affairs Minister Eamon Gilmore said the issue of bank debt was “a separate set of negotiations that the Government has had under way for some time. We’ve had some success in that area with the reduction in the interest rate and the change in the promissory note”.

Former Fine Gael taoiseach and president of the IFSC John Bruton said the fiscal treaty was about nothing more than budgetary discipline and should be debated on its own merits. Other issues, such as bank debt, could be debated on another day, he said.

Mr Ganley, a businessman and failed candidate in the 2009 European Parliament elections, dismissed “empty threats” that Ireland would not be able to borrow on the private markets if a rejection of the treaty results it the country being barred from accessing the EU’s permanent bailout, the ESM.

“Any Irish government claiming it would be barred from markets for years would clearly be admitting that it is incompetent to hold office,” he said.

But former deputy director of the IMF Donal Donovan predicted there was a greater than 50% chance that Ireland would need more financial aid once the current bailout ran out at the end of 2013.

He said there was “no way” the IMF would provide the funding on its own without the EU, which will block access to the ESM for countries that do not ratify the fiscal compact treaty.

“The IMF has made it pretty clear throughout this euro debt crisis that they only go in partnership with Europe,” he said.

“If the Europeans are not willing to take the risk to lend to Ireland, there’s no way, in my view, that the IMF will be able to do it.”

While campaigning on both the yes and no side intensified, attention in the eurozone was focused on Greece, where talks aimed at forming a coalition government looked set to fail.

Leaders of the three biggest parties, which each failed to form a government in the past week, convened but the meeting broke up after less than two hours due to an impasse over the country’s EU/IMF rescue plan. Another election in mid-June now looks likely. If the next government rejects the bailout it could mean the end of loans that Athens needs to stave off bankruptcy and possible exit from the single currency.