ECB and bank debt - Deal failure would be catastrophic

The Fine Gael/Labour Coalition has invested so much of its political capital in getting a better deal from the European Central Bank on the Anglo Irish Bank promissory notes that unless it succeeds in a transparent way its survival will come into question.

Even if Enda Kenny’s negotiators secure a deal short of the modest expectations created by Government, that may still be the case. Even as the Taoiseach reiterated his optimism about a deal in the Dáil yesterday afternoon, that possibility remains a reality.

Not only would the Government face the sternest challenge since it came into office almost two years ago, but the whiff of optimism beginning to permeate the economy might well evaporate. Yesterday’s Central Bank downgrading of growth predictions — from 1.7% to 1.3% — will influence that mood too.