Irish bank debt deal is problematic: Germany
Published 19/02/2013 | 04:20
Germany's central bank says the deal to cut the cost of bailing out Anglo Irish Bank by scrapping the notorious promissory notes is "problematic".
In its monthly report Germany's Bundesbank said the involvement of the Irish central bank in an agreement that eases costs for the Government is problematic.
The German view is a blow to Irish government efforts to calm mounting criticisms of a deal some commentators see as tantamount to "monetary financing" by the European Central Bank (ECB).
It remains to be seen whether Germany will push for the deal to be revisited.
Monetary financing is the term used to describe direct financial support for governments by the ECB, which is banned under European law.
"The procedure proves the increasingly stronger and more problematic inter-linkage between monetary and fiscal policy in the European monetary union," the Bundesbank said.
"The European Stability Mechanism, which should be responsible in this regard, has been established to provide any help to individual member states in servicing debt."
The head of Austria's Central Bank, Ewald Nowotny, said he thinks the Ireland has found a "reasonable solution" to the Anglo Irish Bank issue.
He noted that the ECB did not decide on Ireland's ability to relieve its debt burden by spreading out payments to its central bank over more years, but added: "As an outsider I see this as a reasonable solution that was made here, not least because the ECB had advised against involving investors in Ireland's debt resolution efforts."
Meanwhile, Social Protection Minister Joan Burton has repeated her claims that money freed from the promissory note deal should be used to soften the next budget.
Despite reports that debt masters in the Troika would oppose such a move, the Labour TD said Ireland should benefit from the gains of the deal.
"The critical thing is that the promissory note deal gives Ireland a small bit of extra leeway in relation to helping people to get back to work," Ms Burton said.