Michael Noonan seeks statement of intent on Anglo promissory notes to help frame BudgetMonday 08 October 2012 23.52
Minister for Finance Michael Noonan has said that a statement of intent from the ECB on a possible deal on Anglo Irish Bank promissory notes would help him to frame December's Budget.
Officials were, however, downbeat on getting agreement on all aspects of Ireland's bank debt soon.
Mr Noonan was speaking at a meeting of eurozone finance ministers in Luxembourg as they prepare to launch the European Stability Mechanism (ESM).
He accepted that the "political timeline" for a deal was March next year, when the next payment of the promissory notes is due, but that a statement of intent would be welcome in the meantime.
Mr Noonan said: "On the promissory note the political timeline is to get a new arrangement by March when the next tranche of money has to be paid.
"It would help me doing the budgetary arithmetic if something could be arranged or a statement of intent could be achieved before the Budget."
Mr Noonan said getting a deal on the promissory notes and on recapitalising other Irish banks for "legacy debt" were two separate areas of discussion.
The question of using the €700bn ESM to directly recapitalise Irish banks for past debts remains unclear.
The Government insists that the agreement reached by eurozone heads of government in June implicitly paved the way for the ESM to recapitalise Irish banks for legacy debt.
At a news conference coinciding with the launch of the ESM in Luxembourg, the fund's managing director, Klaus Regling, said of the June statement's commitment to using the fund for bank recapitalisation: "That sentence is there. Everyone can read it."
However, when asked by RTÉ if it also referred to legacy debt, Mr Regling said: "This part has not been discussed by any European bodies."
The use of the new ESM for bank recapitalisation cannot be clarified completely until the ECB's new role of supervising eurozone banks has been established and is working effectively.
While the European Commission says the Single Supervisory Mechanism could be in place by 1 January, officials admit that because of German reservations it could take considerably longer.
Irish officials admit that the technical aspects of defining the ESM's possible role relating to Irish legacy debt, and also defining what that debt actually refers to, will take time, and that the deadline for getting a deal is therefore somewhat out of the Government's hands.
There is confidence, however, that an overall deal involving both promissory notes and bank recapitalisation, could be in place before the end of March deadline.
Mr Noonan said it was unlikely the issue would be dealt with in detail at today's meeting of eurozone finance ministers.
However, he said he was encouraged that the rules setting out how the ESM will work will include differential interest rates for issuing bonds to both governments and for banks.
He said that sovereigns might, for example, be charged ten basis points, while banks could be charged 30 basis points.
"The very fact that it's there and priced seems to me it's a policy which everybody intends to implement," he said.
The finance ministers approved the next tranche of Portugal's bailout, but the head of the IMF, Christine Lagarde, said Greece still had to do more in order to secure the next installment of its rescue package.
The IMF's own report shows that the Greek economy will contract by a further 6% next year.
Financial Transaction Tax
Mr Noonan was also asked about the IFSC Clearing Group and its role in lobbying against the proposed Financial Transaction Tax (FTT).
He said: "The financial services industry is a very important industry in Ireland and we will develop it.
"We will ensure that it is competitive with other financial centres around the world, and we did that in the last Finance Bill, where 21 separate measures were taken to tweak the IFSC package. Taken in their totality they were well worthwhile."
The ESM will have a total fund of €700bn, although its actual lending capacity will only be €500bn.
This is because the ESM will need a buffer in order to maintain a AAA rating.
The fund will have €80bn in paid-in capital, which is made up of contributions from the 17 eurozone member states.
Ireland's capital contribution will be €1.27bn over three years, representing 1.59% of the total amount.
The other €620bn comes from what is known as callable capital, where the ESM calls upon member states to contribute funds as and when necessary.
The ESM was supposed to come into operation in July, but it was held up by a legal challenge in Germany.
In September, the German Constitutional Court ruled that the treaty was compatible with the German constitution, but added that any ESM liability for Germany beyond €190bn would require prior approval from the Bundestag.
The first hearing of Independent TD Thomas Pringle's complaint on the ESM at the European Court of Justice is on 23 October following a referral by the Supreme Court.