EU loan to ease bank debt ‘never an option’

There was never any intention to allow Ireland use an EU loan to reschedule its banking debt, diplomats have said in the clearest warning yet that the country faces an uphill struggle to cut its enormous cost.

However, while Germany, the Netherlands, and Finland — who are insisting there can be no help for past debts — held fast to their shock statement of Tuesday, the European Commission says it is just a contribution to the debate on how the new rescue fund, the ESM, can be used.

The ramifications of the statement were still being teased out, with one economist pointing out that under these conditions, even if the ESM could buy AIB and the Government’s 15% share in Bank of Ireland, the State would get only a fraction of the money put into them.