Breathing space for Ireland as EU softens bail-out conditions
Ireland clinched a long-awaited deal to ease the burden of its bank debts, sending its borrowing costs falling to pre-crisis levels and bolstering its chances of ending its reliance on EU-IMF loans this year.
After nearly 18 months of negotiation, Prime Minister Enda Kenny won European Central Bank (ECB) approval to stretch out the cost of bailing out Anglo Irish Bank, slicing billions off the country’s borrowing needs and cutting its budget deficit.
“Today’s outcome is an historic step on the road to economic recovery,” Kenny told a packed Parliament in Dublin. “It secures the future financial position of the state.”
The assent of the ECB is a major coup for Kenny, who was forced to call an emergency session of Parliament Wednesday night to liquidate Anglo Irish, a lender whose casino-style attitude to risk helped precipitate the country’s financial implosion.
Kenny’s announcement came hours after lawmakers voted to dissolve a government-owned “bad bank,” the Irish Bank Resolution Corp — the focal point for Ireland’s divisive 2010 agreement negotiated with the ECB to repay foreign bank bondholders in full.
The agreement stretches the cost of bailing out Anglo Irish over 40 years rather than 10 and cuts Ireland’s borrowing needs by 20 billion Euros over the next decade. It also gives the government another one billion Euros to work with in forthcoming budgets.
Technical talks between the ECB and Irish officials had been bogged down by ECB concerns that any deal given to Dublin to ease the 48 billion Euros cost of the Anglo promissory notes could set a precedent for other countries, such as Spain, which are also dealing with large bank debts.
But with European leaders keen to offer a success story from the region’s debt crisis to encourage both voters and potential investors, Dublin went back to the drawing- board.
The new deal was designed so that the ECB did not have to vote on it, enabling ECB President Mario Draghi to say simply that the Governing Council had merely “taken note” of Dublin’s plan.