|Wolfgang Schäuble, German finance minister, likely exchanging pleasantries about the official end of Ireland's international bailout on Sunday, Dec 15, at the Eurogroup meeting of Eurozone finance ministers, Brussels, Dec 09, 2013. There were however, no gifts forthcoming for cargo cultists.|
There will be no refund by the Eurozone rescue fund of the sovereign cost of the Irish bank bailout. The door may seem to be still slightly ajar but that appears to be because there hasn't been a formal agreement yet to say no. Meanwhile, the use of the rescue fund has been ruled out in return for taking responsibility for mortgage trackers from the Irish banks
“In exceptional cases, and by unanimous votes, there may be retroactive recapitalisation, but it doesn’t seem very likely,” Klaus Regling, the head of the European Stability Mechanism said.
Olli Rehn, the commissioner responsible for the euro, said Ireland would continue to be subject to post-programme surveillance, involving biannual trips, until 75% of its bailout loans were repaid, though the commission would “try and align as best as possible” Ireland’s post-programme surveillance with the regular reviews expected to take place under the new “two-pack” rules.
The claim that there had been an agreement on refunding the cost of the bailout in June 2012, was stretching the truth for both home consumption and possibly a hope that Europe could be nudged to a resolution.
There was agreement on the Anglo promissory notes last February and the €30bn support of the former builders' bank was mainly a bailout of depositors. There was no chance that this amount would have been refunded.
Last June, Finfacts noted that Ireland is second to Greece in the rankings of the burden of sovereign debt but when household debt is included, we are the biggest debtor of the western world as a ratio of economic output.
As for June 2012, there was no EU deal and the relevant paragraph of the communiqué [pdf] of the June 29, 2012 European summit, reads:
We affirm that it is imperative to break the vicious circle between banks and sovereigns. The Commission will present Proposals on the basis of Article 127(6) for a single supervisory mechanism shortly. We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding. The Eurogroup will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme. Similar cases will be treated equally."
There was no commitment about retrospective payments and nor was there a suggestion of an agreement that the European Stability Mechanism (ESM) rescue fund, would in future recapitalize banks. A possibility is not a commitment or agreement.
Enda Kenny, taoiseach/ prime minister, claimed the EU statement was a seismic shift in EU policy.
“What was deemed to be unachievable has now become a reality and that principle has been established and decided and agreed upon by the council, by the heads of government,” he said in a comment to the media in Brussels.
“This is a massive breakthrough for Ireland and it changes the game in terms of our bank debt,” Eamon Gilmore tánaiste / deputy prime minister, told RTÉ radio. “This deal will allow the country to recover much faster,” he said.
Michael Noonan, finance minister, said: “This [deal] takes this further in terms of policy and the intention now is to separate certain bank debt completely from the sovereign balance sheet.”
The Irish ministers, with good experience in spin, appeared to have believed that by claiming that an actual deal had been done, would bring pressure on Germany.
Wonder if anyone of them could name a leader who promised a refund?
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