EU Ministers Urged to Back Bailout-Loan ExtensionsRebecca Christie and Jim Brunsden
European finance ministers were advised by their chief deputy to back loan extensions for Ireland and Portugal to keep those nations' recoveries on course.
“Portugal and Ireland are still highly vulnerable to negative news from other euro-area member states,” according to a letter from Eurogroup Working Group President Thomas Wieser prepared for finance ministers from the 17-nation euro zone and the 27-nation EU before meetings tomorrow in Dublin. He said Irish and Portuguese rescue programs face “strong headwinds” from events like the depositor losses imposed in Cyprus and would benefit from a “strong signal” of EU support.
“I would recommend to ministers to come to a political endorsement of the maturity extension,” Wieser said, noting that financial markets have priced in the two nations getting the rescue loan extensions. The so-called troika of European authorities and the International Monetary Fund has recommended that the loans be extended by seven years.
Wieser also urged the EU to conclude legislation on bank supervision and on how to handle failing banks, so that it can procede to the next stage of its banking union strategy, in a separate letter to Irish Finance Minister Michael Noonan. Ireland currently holds the EU’s rotating presidency.
The EU needs to clarify the “rules of the game” for handling failing banks, in particular to counter uncertainty that has flared up since last month’s negotiations on a 10 billion-euro ($13.1 billion) aid package for Cyprus, Wieser said.