Michael Noonan: Debt deal ‘unlikely to be addressed' before end of year

Ireland’s attempt to get a deal on historic bank debt is unlikely to be addressed until the end of this year at the earliest and will be considered alongside the potential sale of State-owned banks, Finance Minister Michael Noonan has said.

The issue of retro recapitalisation of Ireland’s bailed-out banks is expected to be informally raised today with German chancellor Angela Merkel.

A Government spokesman said that “the matter could potentially be touched upon” by Taoiseach Enda Kenny when he meets chancellor Merkel during the European People’s Party (EPP) congress in Dublin.

Mr Noonan reiterated the agreement made last June, where EU member states said retroactive recapitalisation may be decided on a case-by-case basis.

The union’s future bailout fund, the European Stability Mechanism, is the technical mechanism which will allow for an injection of capital for bank bailouts.

Outlining priorities for the year ahead yesterday, Mr Noonan added: “There is significant time for consideration of this option as retroactive recapitalisation can only occur after the single supervisory mechanism is operational, most likely towards the end of 2014.

“Any application for retroactive recapitalisation will be considered in light of the potential returns to the State from alternative options for realising the value of the State’s bank holdings.”

The Government has been trying to persuade European countries to retrospectively pay for the bailout of Irish banks, with specific focus on the estimated €30bn paid into AIB, Bank of Ireland, and Permanent TSB.

This week marks Chancellor Merkel’s first trip to Ireland and is seen as an opportune moment among coalition figures to raise the issue during informal talks.

But Department of Finance officials stressed a debt deal is not the only method to recover funds paid out for the bank bailouts. Bank asset sales could complement any deal, officials say, and point to the sale of Bank of Ireland shares this week, which netted wealthy investors €690m for 6.4% in shares.