Irish Finance Minister Michael Noonan says Germany and France have got his back.
Noonan is seeking as much as 30 billion euros ($39.6 billion) from Europe’s new rescue funds as a refund for the money it spent on the recapitalizing its surviving banks. German Chancellor Angela Merkel and French President Francois Hollande called Ireland a special case.
That phrase is “shorthand,” Noonan said in an interview with Francine Lacqua and Guy Johnson on Bloomberg Television in London today. The message is “we realized that there was a very heavy imposition put on you, so you’ll be looked after.”
Noonan’s comments come two weeks after Ireland’s government secured a deal to stretch out the cost of rescuing the former Anglo Irish Bank Corp., which he said removed a “millstone” from taxpayers. Now, Noonan wants back the money it put into the remainder of the banking system, mainly Allied Irish Banks Plc and Bank of Ireland Plc, after a real estate bubble collapsed in 2008. He said the banks won’t need new capital.
“While some of it was our own fault, a lot of the action was taken at the direction of the European Central Bank to prevent contagion spreading to the European banking system,” Noonan said. “As Ronald Reagan used to say, ‘we took one for the team.’”
Irish bonds slumped in September after finance chiefs from Germany, the Netherlands and Finland excluded “legacy assets” from their rescue facility’s responsibility.
After a late afternoon phone call between Irish Prime Minister Enda Kenny and Merkel said Oct. 21 that Ireland is a “special case,” without elaborating what that might mean. Hollande used the same phrase a day later.
Ireland sought an international aid package in 2010 as the country came close to bankruptcy under the weight of rescuing its financial system.
Noonan said the International Monetary Fund is prepared to “hold our hand” as we exit the program at the end of the year. The government aims to sell a 10-year bond in the first half of this year, as part of a campaign to qualify for the ECB bond-buying program as a “backstop,” Noonan said.
“I don’t think we’d apply to avail of it,” he said. “We’d apply to use it as a backstop so that we could access the market, so that lenders would know that it’s there.”
On the restructuring of the Anglo Irish debt, Noonan said there is “no suggestion” that the agreement will be unwound. He also said he wasn’t surprised by the comments on the deal by ECB Governing Council member Jens Weidmann. The Bundesbank President said the transaction on the Irish promissory notes comes close to contravening a ban on the monetary financing of governments.
Discussions “had been going on for several months” and the deal couldn’t have happened unless agreed by all ECB council members including Weidmann, Noonan said.
“They didn’t challenge the fact that it was done and that it was in accordance with the treaty,” he said. “No rules were broken.”
The yield on Ireland’s bonds maturing in October 2020 rose 7 basis points to 3.72 percent. Ireland raised 500 million euro from the sale of 3-month Treasury bills earlier today, at an average yield of 24 basis points, an increase of four basis points on its last bill auction in January.