Ireland ‘would expect Spanish debt terms’

Ireland would expect similar terms if the EU steps in to shoulder Spain’s bank debt, a minister has said.

Spain is pushing for its banks to be recapitalised from European funds rather than having to bear the burden itself, as Ireland did.

Transport Minister Leo Varadkar said last night that, if Spain was granted such a deal, the Government would expect the same terms to be afforded retrospectively to Ireland.

“If you sign up to something early, if you like, and the conditions improve, then the principle in Europe has always been that those better terms are applied retrospectively to the country that went in first,” Mr Varadkar told RTE’s The Week in Politics. “We would expect that if Spain does get better terms than we got, that we should have those terms applied to us retrospectively as well.”

One possibility is that the EU’s permanent bailout fund, the ESM, which will be established shortly, could be used to recapitalise financial institutions and bear the burden of bank debt.

Tánaiste Eamon Gilmore said such issues, as well as the need for economic growth measures, would be discussed at the EU leaders’ summit at the end of this month. That summit is expected to be dominated by Spain’s woes as the country attempts to get to grips with its own debt crisis and fending off a bailout.

Spain is urging eurozone leaders to set up a fiscal authority to manage the bloc’s finances and send a clear signal to markets that the euro project is irreversible.

Spanish prime minister Mariano Rajoy said the authority would go a long way to alleviating Spain’s problems which, along with the prospect of a Greek exit from the euro, have threatened to derail the currency.

However, establishing a new authority could require a change in the EU treaties, a usually lengthy and politically painful process which would require ratification in all 27 member states.

Last week, in what was seen as a significant intervention, ECB president Mario Draghi said EU leaders should break away from the incremental approach that had failed to get ahead of the eurozone debt crisis for more than two years and clarify their vision for the future of the currency.

However, the prospects of a rapid solution diminished at the weekend as German chancellor Angela Merkel hardened her opposition to euro bonds, seen by many EU states as fundamental towards easing the crisis.

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