GERMAN Finance Minister Wolfgang Schaeuble has said Europe’s bailout pot is unlikely to be available to help Ireland recover part of the cost of our bank bailouts.
As Finance Minister Michael Noonan prepared to deliver the latest austerity Budget, Mr Schaeuble said German law would need to be changed to allow the European Stability Mechanism (ESM) to provide aid directly to banks.
“The retroactive bank recapitalisation is not probable for the time being,” Mr Schaeuble told reporters on the fringes of a meeting of European finance ministers in Luxembourg.
“In Germany we need a change of German legislation.”
And he claimed the step would be as difficult as a “referendum in Ireland”.
The German politician also played down hopes that Ireland would be able to apply for a so-called precautionary credit line, a form of overdraft, when it leaves the bailout at the end of the year. The move would be aimed at reassuring investors as the State moves from bailout to full market access.
But Mr Schaeuble said he didn’t see “any necessity for this”.
“We think Ireland is doing very well. Ireland did what Ireland had to do and now everything is fine.”
It comes just days after Mr Noonan gave the clearest signal yet that the State will leave the bailout in December without a precautionary credit line.
Refusing to take some form of so-called backstop would block Ireland from accessing the European Central Bank’s as-yet-unused Outright Monetary Transactions (OMT) programme of government bond purchases.
But it would also reduce the level of oversight here by European officials, bolstering the Government’s claim to have restored the State’s finances, and sovereignty.
The German comments are the latest blow to Ireland after the country’s second biggest party insisted the Government must raise the 12.5pc corporation tax rate. Reports last week said early coalition talks between the social democratic SPD and Angela Merkel’s conservative CDU were snagged on Irish issues. The SPD is also completely opposed to the direct recapitalisation of troubled European banks through the ESM.
On the first day of the two-day meeting in Luxembourg on Monday, ECB board member Jorg Asmussen stopped short of saying whether he believed Ireland should apply for an overdraft to smooth the path back into the markets on a full-time basis, stating it was up to the Government.
Meanwhile, Britain has dropped its objections to granting the ECB sweeping powers of supervision in the eurozone, but EU governments remained divided yesterday over how to deal with failing banks ahead of a rapidly approaching December deadline.
Europe’s finance ministers are striving to agree the next big step in European integration by setting up a banking framework, chiefly for the eurozone, that would not only police the bloc’s banks but find joint solutions to their problems. (Additional reporting Reuters)