Absence of a bank debt deal a major blow to Ireland’s debt sustainability
Fianna Fáil Finance Spokesperson Michael McGrath has described last night’s comments by European Commission President Jose Manual Barroso about Ireland’s prospects of a retroactive deal on bank debt as a betrayal of previous commitments that have been made by EU Leaders that Ireland would be treated as a special case.
Deputy McGrath said: “President Barroso’s blunt comments about Ireland are not open to misinterpretation. He has essentially shut the door on any European Commission support for a deal on retroactive bank recapitalisation for Ireland. His statement flies in the face of the communiqué agreed by EU Leaders on 29 June 2012 which provided for the separation of banks and sovereigns and explicitly stated that the Irish case would be looked at individually.
“The Irish government enthusiastically welcomed the June 2012 summit agreement as a game changer in the belief that it would lead to a deal on the €30 billion injected into AIB, Bank of Ireland and Permanent TSB. The prospect of such a deal is looking more remote with each passing week. This is a major blow to our debt sustainability with our debt to GDP ratio now exceeding the benchmark 120%.
“In his comments, President Barroso has completely ignored the role played by European authorities in the full cost of bailing out Irish banks being shouldered by the Irish State. He should be reminded that the ECB flatly rejected efforts by the previous and government to impose losses on unguaranteed senior bondholders. Such losses will in future form part of the winding up of bust banks across Europe. The failure of regulation at a pan European level also played an important role in the crisis.
“The Taoiseach now urgently needs to ask EU Leaders to recommit to the 29 June 2012 summit statement and to spell out exactly what it means for Ireland. In the absence of a deal on this legacy bank debt, the reality for Ireland now is that our economic future comes down to a gamble on growth. If projected growth levels do not materialise, our fragile debt position will become unsustainable and both Ireland and Europe will again face major problems.”