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Irish Vote Gives Kenny Leverage to Seek Concessions on Bailout
Ireland’s decision to vote over the European fiscal compact may offer Prime Minister Enda Kenny leverage to seek additional concessions on its bailout program, according to Bloxham Stockbrokers and Glas Securities.
“It’s important at this delicate stage in the euro-zone crisis that there is a ‘yes’ vote from the Irish people and that concessions be made by Europe to make sure it gets through,” Liam Dunne, an analyst at Bloxham in Dublin, said today in a note. “It does give the government some leverage.”
Ireland is negotiating with its bailout partners on steps to re-engineer the cost of rescuing Anglo Irish Bank Corp., now known as Irish Bank Resolution Corp., before a scheduled 3.1 billion-euro ($3.7 billion) payment by the state next month. Irish voters rejected greater European integration in 2001 and 2008 votes before endorsing it in reruns.
“We would not rule out some form of carrot-and-stick approach whereby some concessions are offered,” fixed-income firm Glas said in a note.
Ireland is looking for help in the wake of the bailout of Anglo Irish, once the country’s third-largest lender by assets. The state is seeking to refinance about 30 billion euros of so- called promissory notes used to rescue the bank on better terms and over a longer period. The total bill for bailing out Anglo Irish may be at least 48 billion euros including interest payments.
Irish Deputy Prime Minister Eamon Gilmore told Dublin-based broadcaster RTE yesterday that the government is making progress in the talks, which are already “well advanced.”
Ireland’s European Affairs Minister Lucinda Creighton said today that a “no” vote would be a “very negative signal to investors” in the country and put it in a “very difficult” position.
Not everybody believes Ireland’s decision to hold a vote will increase its bargaining power.
“I would be less convinced that the government has additional bargaining power from this,” said Jonathan Loynes, an economist at Capital Economics Ltd. in London. “I would have thought while this is still unclear and until the result is known, the rest of the euro zone might be rather less likely to make Ireland additional concessions.”
Kenny said he is “confident” the public will back the vote after details about it are publicized. No date has been set yet for the vote.
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