We ‘pave road to recovery’ but Merkel still won’t give an inch

WHATEVER Taoiseach Enda Kenny hoped to get from his visit to German Chancellor Angela Merkel, the overall impression was that he came away empty-handed.

Ireland has an usual collection of requests. Having been forced at the insistence of the US and the European Central Bank (ECB) to continue to pay out to investors of the defunct Anglo Irish Bank, the Government wants to ensure nothing changes this.

The long-term bailout facility, the European Stability Mechanism, (ESM), due to come into force in 2013 but which may be introduced sooner, has a provision for burning bondholders under certain circumstances.

The country may need to borrow from the ESM even if it does return successfully to the markets in 2013, but wants to ensure that investors’ confidence in the country is not undermined by fear of being “burned” under the terms of the ESM.

The Government would also like to be able to reduce the cost of the €32 billion of IOUs on Anglo Irish Bank hanging over its head for close to two decades to come, but the complex resolution requires the support of the eurozone and the ECB.

Ireland, like everyone else, also wants a swift resolution of the euro crisis as all the heavy lifting the country has already done would be set at naught if something is not done.

But despite the country being portrayed in Germany as worthy since “amid quiet suffering, Irish pave road to recovery” to quote one of its media, Ms Merkel does not feel compelled to hand out sweeties to anyone.

While Mr Kenny appeared like “the mouse that roared” at their spikey press conference in Berlin, both were in danger of sounding shrill and petulant.

He warned we would have our sovereignty back as soon as we could pay them back their money, while she insisted being part of the euro would mean being forever in the firm embrace of a good book-keeper who made sure you spent only as much as you could afford.

He warned there was no time for putting more rules and treaty changes in place, since the crisis was washing away the ground beneath their feet.

She has never been one to be rushed, although she has certainly moved her position hugely over the past year.

Many now fear France’s credit rating will be downgraded, but see it as the best chance to stir Ms Merkel to take the kind of action almost all EU leaders are demanding — to unleash the vast firepower of the ECB in one form or another and stop the drain on Europe’s resources.

The Taoiseach was correct in saying the European Financial Stability Facility could not now carry out the rescue. Attempts to get the rest of the world to invest have all but failed.

Some are not sorry that China, Brazil and Russia among others are not rushing to bail out Europe — it would, as some say, be tantamount to giving them a seat at the eurozone table. And it is doubtful that even if the fund reached the planned €1 trillion mark it could do all that was required of it, including bail out economies the size of Spain.

Perhaps rather than lending to Europe, China prefers to wait until it can buy up more of the continent’s companies and infrastructure at a knockdown price. It will have tripled its investment in Europe over the past 12 months at the end of this year, much spent in the troubled economies of Greece, Portugal, Spain and Italy.

Commission president Jose Barroso will put forward ideas for a Stability Bond on Wednesday and hopefully those inside Ms Merkel’s cabinet to whom she listens will take it on board, or are putting together their own idea for a massive, last-minute rescue package.

There is a sense that the eurozone is now living on borrowed time.