Euro-area finance ministers will discuss a new accord for dealing with Ireland’s legacy banking debt as soon as technical details are worked out, Luxembourg Prime Minister Jean-Claude Juncker said today.
“We will discuss a possible improvement of the well-performing program at one of our next meetings once the technical discussions are concluded,” Juncker told reporters in Nicosia, Cyprus, describing Ireland’s current rescue program as a success story. Juncker leads the finance ministers’ group.
International Monetary Fund Managing Director Christine Lagarde said it’s “important” that Ireland receive support in its banking cleanup. ECB Executive Board Member Joerg Asmussen said the organization’s staff has been in “intense discussions” on “enhancements” to Ireland’s program.
Ireland’s debt level has more than tripled over the last five years, in part because of the cost of saving the nation’s financial system, and the government is campaigning to lower the overall cost of the banking rescue. Irish Finance Minister Michael Noonan said today that political and technical talks are underway. He declined to sketch out a timeline, saying only that he sees broad support for a deal on easing Ireland’s terms.
“Many aspects of it are contingent on progress elsewhere, especially in Spain,” Noonan said. He said a bank debt deal would require support from euro-area ministers, while the issue of refinancing the 30 billion euros ($39.4 billion) of promissory notes used to rescue the former Anglo Irish Bank Corp. could be negotiated with the European Central Bank.
Ireland needs to keep pressing forward fixing its financial sector in tandem with other reforms, the ECB’s Asmussen told reporters. He said the central bank’s staff discussions had included talks on the promissory notes.
“The Irish program is well on track,” Asmussen said.
In all, Ireland has injected or pledged 64 billion euros into its banks since the collapse of a domestic real-estate bubble. European leaders in June opened the door for the euro-region’s rescue funds to directly recapitalize banks, and the government is using that declaration to seek retrospective help.
The yield on Ireland’s October 2020 bonds, regarded as the benchmark, was unchanged at 5.27 percent. The yield on the bond on July 18 last year was 14.08 percent.
The IMF said this week Ireland would “significantly” reduce” its financing needs in the coming years if it could replace the notes used to bail out former Anglo Irish with long-term government securities or a euro-area bailout fund loan.
Ireland could also cut its debt if the permanent euro-area rescue fund invested directly in the nation’s banks, the fund said. Five of the six biggest domestic banks have been taken over by the government.
Investor confidence in Ireland is tied to the additional assistance being received, said European Union Economic and Monetary Affairs Commissioner Olli Rehn. He said Ireland is going through necessary rebalancing and has met its targets.
“This improved sentiment is, I believe, due in part to commitment made by the euro area to find solutions to improve the sustainability” of Ireland’s debt, Rehn said. “The quality of the end result is more important than the schedule.”