Kenny seeks changes to terms of bank debt deal

Irish prime minister says solidarity is a two-way street after meeting European commissioners.

Enda Kenny, the prime minister of Ireland, used a meeting with European commissioners in Dublin to call for a relaxation of the terms of his country’s debt repayments.

Ireland has contributed 30% of its gross domestic product (GDP) to prop up its banking sector as part of an €85 billion bail-out from the eurozone and the International Monetary Fund that was agreed in 2011.

  

Kenny wants the European Central Bank (ECB) to ease Ireland’s payment terms on €28bn of promissory notes – a type of IOU – that Ireland used to prop up Anglo Irish Bank, one of its biggest lenders.

  

“The solidarity we speak of is a two-way street,” Kenny said after meeting José Manual Barroso, the president of the European Commission, and other commissioners today (10 January).

  

Ireland is scheduled to repay €3bn at the end of March but Kenny said that he was looking for an agreement to change the terms of the deal before then.

  

In addition to the issue of promissory notes, Ireland also hopes that a decision will soon be taken to allow the eurozone’s rescue fund, the European Stability Mechanism (ESM), to retroactively recapitalise Irish banks.    

Ireland, which took over the rotating presidency of the Council of Ministers on 1 January, would be in a position to leave the EU-IMF rescue programme on schedule at the end of this year, if it were to benefit from easier repayment terms and direct recapitalisation.

Kenny pleaded with the ECB and other eurozone member states to take its situation seriously.

  

He said: “No other country had to deal with promissory notes or an electorate that has had to bear the full burden of €64bn [to rescue banks].”

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Kenny said that Ireland needed “assistance from European colleagues” to help the country get back on its feet.

  

Leaders of member states pledged to “break the link between sovereign debt and bank debt” at the European Council in June – paving the way for direct recapitalisation of banks from the ESM once the eurozone’s banking supervision system is set up. But this has not yet happened.

  

Barroso said he supported Kenny’s demands. Herman Van Rompuy, the president of the European Council, yesterday also hinted that he backed Ireland’s calls.

“We are urging member states to stick to the spirit and the letter of the statement of the European Council in June,” Barroso said after his meeting with Kenny.    

He said that the Commission was “working hard” to get agreement between the Council and the European Parliament on the single supervisory mechanism.

  

“Once this agreement is made we can proceed,” Barroso said. “Technical discussions are still ongoing and we can’t predict how long this will take.   

“A direct recapitalisation instrument breaks the link between bank debt and sovereign debt, and this is our goal and we are working to reach this goal as soon as possible.”