Kenny welcomes 'positive' rescue fund change

Monday 20 June 2011 22.09
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Jean-Claude Juncker (centre) - No preferred creditor status
Jean-Claude Juncker (centre) - No preferred creditor status
Eamon Gilmore - Meeting German counterpart Guido Westerwelle today
Eamon Gilmore - Meeting German counterpart Guido Westerwelle today

Taoiseach Enda Kenny has welcomed the changes to the European Stability Mechanism as ‘positive for Europe and not just Ireland’.

Mr Kenny said the move would give bond purchasers a sense of confidence that they were not going to be subordinated when that might become a necessity.

Speaking at a meeting of the British-Irish Council in London this evening, Mr kenny said he had told participating ministers from Scotland, Wales and Northern Ireland that there were signs of confidence in the Irish economy and that the country was measuring up to the conditions set out by the bailout mechanism.

The Taoiseach added that Ireland was central to the European process and was not preparing for the destruction of the euro.

EU finance ministers have made an important change to their future rescue fund, which they hope will help already bailed out countries to regain access to debt markets.

The Irish delegation is reported to believe that the change will make it easier for Ireland to re-enter the bond markets.

Jean-Claude Juncker, who chairs the meetings of eurozone finance ministers, said the European Stability Mechanism, which will come into force in mid-2013, will not have preferred creditor status when it helps countries that have already been bailed out.

Having preferred status means the fund would have to be repaid before any private lenders.

Minister for Finance Michael Noonan said the move was very good news for Ireland because it would be virtually impossible for programme countries to get back into the market while the provision remained.

He said the move meant all creditors would now have the same ranking - whether or not they were in the ESM.

Under the original plan, the ESM would get first call on any money and get preference over any other creditors.

The Minister said this would have meant that after Ireland fulfilled its EU/IMF programme, investors would still be reluctant to lend money because of the risk they could lose their investment if we ended up in an ESM programme in the future.

Interest rate resolution will take time - Noonan

Minister for Finance Michael Noonan says he does not foresee any resolution this month to the Irish demand for a lower interest rate on its EU/IMF bailout.

He said this was due to the fact that French Finance Minister Christine Legarde was now almost a certainty to take the top job at the IMF, and she would have to take up duties almost immediately.

Mr Noonan said he was waiting to learn who her successor might be so that he could build a relationship with them.

He said that Ireland was not working on a timeline but would take every opportunity to raise the issue.

Mr Noonan described it as a difficult issue because ‘[French] President Sarkozy wants major reductions on Ireland’s corporate tax rate and we have said that's not negotiable’.

Earlier, Tánaiste Eamon Gilmore said it is not sustainable for the European Union to withhold a reduction of the interest rate Ireland has to pay on the EU/IMF bailout.

Mr Gilmore is due to hold a bilateral meeting with his German counterpart Guido Westerwelle today in Luxembourg.

'It does not make sense to withhold the cut from a country that is implementing its programme and making progress.'

The Tánaiste said Government Ministers are continuing to work to break the logjam.

However, he said he was not in a position to make a prediction if a breakthrough might happen at a meeting of EU leaders this week.

He said the main objective was to obtain the breakthrough, rather than set an arbitrary deadline that may or may not be met.

Mr Gilmore added that it was time for Ireland to stop being bracketed with Greece because Ireland was succeeding.

Elsewhere, Taoiseach Enda Kenny has responded to comments by economist Colm McCarthy on Morning Ireland.

Mr McCarthy said that the Government would have to raise €3.8bn in the Budget in December.

The Taoiseach said the Growth and Stability Programme submitted last month had suggested there could be a requirement for €3.6bn.

He said the Government would make its decisions for the 2012 Budget following Minister Brendan Howlin's comprehensive spending review in September.