Coalition drive for debt relief on banks suffers setback – The Irish Times – Wed, Sep 26, 2012
THE GOVERNMENT’S campaign for debt relief was dealt a fresh blow yesterday as Germany, Finland and the Netherlands said national bodies should remain liable for most bank losses. The three states are insisting that governments remain on the hook for loss-making legacy assets even after any bank rescues by the ESM fund.
This demand, laid down by the countries’ finance ministers, is in apparent defiance of the decision by EU leaders in June to break the link between sovereign and bank debt.
After talks near Helsinki, the ministers said the ESM should assume only a limited burden if it makes direct bank recapitalisations.
The intervention comes as the Government faces persistent difficulty in its pursuit of a deal in Europe to ease the burden of the banking debt.
There is increasing concern in Dublin about German-led backsliding on the promise of a radical new deal to settle the banking crisis in Ireland and Spain. One of the Government’s core objectives is for the ESM to take direct equity stakes in the surviving banks: AIB, Bank of Ireland and Permanent TSB.
“It leaves the situation extremely uncertain from an Irish point of view,” said John Fitzgerald of the Economic and Social Research Institute. “Depending on how it is interpreted, it may or may not allow the Irish government to sell its interests in the surviving Irish banks to the ESM.”
EU leaders agreed in principle three months ago to allow direct bank recapitalisations by the ESM, the basic idea being for the European fund to replace governments as the final backstop on banking losses.
However, German minister Wolfgang Schäuble, Finland’s Jutta Urpilainen and Dutch minister Jan Kees de Jager said they want to curtail the ESM’s exposure to bad debts. “The ESM can take direct responsibility of problems that occur under the new supervision, but legacy assets should be under the responsibility of national authorities,” they said.
Posted on September 26, 2012, in Government, IMF/ECB and tagged Banks, Debt relief, ESM, European Stability Mechanism, Ireland, Irish Times, Jan Kees de Jager, Jutta Urpilainen, Wolfgang Schäuble. Bookmark the permalink. Leave a comment.