Ireland's need to cut a deal on its 64 billion euro bank bailout has been plunged into chaos after German chancellor Angela Merkel refused to concede on legacy debt.
After a key Brussels summit to tighten financial regulation, Taoiseach Enda Kenny and the chancellor appeared on collision course over easing the burden of rescuing lenders. "There will not be any back-dated direct recapitalisation of eurozone banks," Ms Merkel said. "If recapitalisation is possible, it will only be possible for the future."
Her remarks came after the Taoiseach said European Union leaders had given a clear reaffirmation of a June 29 agreement to reduce bank debt.
"I made it clear that what we wanted to see was progress toward following through on the principle and the concept of what was agreed in June to a more solid foundation and making that become a reality and moving on implementing that," he said. "This has been done in the wording of the decision there and in full respect of the decision from the 29th June."
Sinn Fein's finance spokesman Pearse Doherty accused the chancellor of giving the Taoiseach a Judas kiss as the pair were pictured in a warm greeting at the opening of the EU summit on Thursday night. "We see photos today of Enda Kenny and Angela Merkel exchanging kisses, but it seems it was a Judas kiss she gave him," Mr Doherty said.
European Commission officials were eager to stress that the finer details of how the union will deal with bailouts and legacy banking debt was not negotiated on over the last 24 hours. Commission president Manuel Barroso has backed the Irish position.
They also said the chancellor was giving a personal opinion on whether legacy issues can be resolved.
Resolving the legacy of Ireland's bank bailout is worth about 33 billion euro if it negates the cost of nationalising Anglo Irish Bank and Irish Nationwide. The argument in favour of a deal has been that the rescue and recapitalisation helped stem losses at German, French, British and other European banks, as well as domestic losses.
Michael McGrath, Fianna Fail finance spokesman, demanded the Taoiseach arrange a bilateral meeting with the chancellor to secure a clarification. "The feebleness of the summit has now been put in the shade by chancellor Merkel's comments which cast an enormous question mark on whether Ireland will get any deal at all," he said.
Mrs Merkel made the remarks after the summit when asked about the position of debt-laden Spanish banks but in her answer made no distinction between any of the debt laden European nations.