France at odds with Germany over Irish bank ‘legacy’ debt

GERMANY AND France are heading for a clash over Ireland’s bank debts as divisions deepen over the scope of a plan to use the European Stability Mechanism bailout fund to rescue stricken banks.

With Germany holding fast to the line that the ESM must not take on “legacy” debts in Ireland or any other country, France is pushing hard for a bigger effort to break the link between bank and sovereign debt.

The French position will strengthen the Government’s hand after a week in which Germany aligned with Finland and the Netherlands to say the ESM should bear only losses incurred under the fund’s supervision.

At a time of strain in the Fine Gael-Labour Coalition, this marked a big setback to Dublin’s long campaign to ease the burden on the State of the €64 billion banking bailout.

The divisions between Germany and France over Ireland come as they move together to advance plans for a European tax on financial transactions. Following the failure to achieve unanimous EU backing for such a tax, the two countries sought support yesterday for an “enhanced co-operation” procedure in which a group of at least nine like-minded states would move ahead together.

With Britain pledged to shun such a tax, the Government has already indicated it will not participate due to fears the IFSC could lose business to the City of London.

via France at odds with Germany over Irish bank ‘legacy’ debt – The Irish Times – Sat, Sep 29, 2012.

via France at odds with Germany over Irish bank ‘legacy’ debt – The Irish Times – Sat, Sep 29, 2012.