June 20 (Bloomberg) -- Ireland is pushing for European finance ministers to leave the door open for retroactive bank recapitalization, two officials familiar with the matter said, amid hardening opposition from Northern European governments.
Irish Finance Minister Michael Noonan wants the euro area’s rescue fund, the European Stability Mechanism, to refund as much as 30 billion euros ($39.5 billion) the state spent saving lenders led by Allied Irish Banks Plc and Bank of Ireland Plc, after the economy crashed in 2008.
The government is fighting to keep the proposal alive as opponents lay out their objections to the plan today in Luxembourg. Frans Weekers, the Dutch state secretary for finance, said his nation is against retroactive recapitalization of banks, while German Finance Minister Wolfgang Schaeuble said that leaders don’t have a lot of room for maneuver.
“The capacity of the ESM is limited,” Schaeuble told reporters in Luxembourg today. “It makes no sense to raise false expectations. That only leads to disappointment in markets.”
More help with the banking debt may smooth Ireland’s path out of the three-year international bailout program, which is due to end at the end of the year. The government will likely seek a precautionary credit line once its current rescue package concludes, said the two officials, who declined to be named because no final decisions have been made.
Speaking to reporters as euro-region ministers arrived in Luxembourg, Noonan said he wanted retrospective recapitalization “to relieve the burden which is inhibiting our growth rates.”
Return to Markets
The entire cost of rescuing the banking system amounted to 40 percent of the economy, or 35,000 euros for every home in the country, the government has said, arguing that Ireland saved the banks at the behest of European authorities.
As a safety measure to underpin the nation’s full return to bond markets, Ireland is expected to seek support from the International Monetary Fund as well as Europe if it decided to avail of a possible precautionary credit line with the euro-area permanent rescue fund to bolster its “durable return to market financing,” the Washington-based fund said yesterday.
To contact the editor responsible for this story: James Hertling at email@example.com