By Ann Cahill, Irish Examiner European Correspondent
A deal on Ireland’s bank debt will remain stuck until Spain looks for EU help, Finance Minister Michael Noonan has indicated at a meeting of EU finance ministers in Cyprus today.
But as ministers from the eurogroup gathered in Cyprus for an informal meeting, the Spanish gave no indication of being in a hurry to make their application. Minister Noonan however was upbeat on getting agreement for the EU’s bailout fund to recapitalise the Irish banks, refunding some if not all the €31bn the Irish taxpayer has pumped into them.
However, while he was certain agreement could be achieved, he could not say when.
“Any arrangement which would have the direct recapitalisation of Spanish banks and applying that formula to Ireland is contingent on progress being made in Spain”, he said.
The Spanish economy minister Luis de Guindos said he was here to listen to what his colleagues had to say. His government is split on when and if to make a move, fearing further harsh conditions with Prime Minister Mariano Rajoy musing that easing of markets meant they may not have to look for an EU bailout at all.
But the outgoing Dutch Finance Minister Jan Kees de Jager left no doubt that irrespective of the tough programme Spain had set itself, “If there will be support, there will be conditions”.
There was speculation that Madrid could make an application after September 28 when it presents it’s budget for next year and when it’s hoped that reports setting out the recapitalisation needs of its banks are delivered.
The government hope to get agreement at least in principle on refinancing the bank debt if possible before the budget is published in November, while they can wait until next March to finalise the promissory notes when the next installment of €3 billion is due Mr Noonan said that the issue of the bank debt could be separated from the talks on the €31 bn in promissory notes for Anglo Irish Bank he said, “if the European Central Bank were willing to arrange that on a bilateral basis”.
Whatever deal they agreed could be endorsed by eurozone finance ministers separately and later. But the financing of the bank debt was purely a political decision. It however needs the unanimous approval of fellow eurozone ministers, and Mr Noonan said he was confident it would be endorsed by the rest of the EU’s finance ministers after that.
While some sources have said they do not believe the EU’s permanent bailout fund, the ESM, should be used to retrospectively fund debt as in Ireland’s case, Mr Noonan was hearing none of it.
Instead he is relying on the unanimous agreement by EU heads of government on June 29 last that “bank debt should be separated from sovereign debt and a specific mention of enhancing the Irish programme to ensure its sustainability was included in that communique so that is the mandate against which I am operating”.