Belfast Telegraph

Thursday 24 July 2014

Kenny dismisses bank debt statement

Taoiseach Enda Kenny has insisted that the decision to separate Irish bank debt from sovereign debt stands

Taoiseach Enda Kenny has dismissed a potentially game-changing statement from Europe's three most economically stable nations which throws doubt on a deal to ease Irish bank debt.

Mr Kenny faced a barrage of accusations that he misunderstood an offer at an EU summit for governments to examine the possibility of a new fund to pay for past bailouts.

And he revealed he had no advance warning from Germany, Finland and the Netherlands that they were planning a statement claiming eurozone countries remain saddled with legacy bank losses.

"The decision of the 29th June was clear and unequivocal," Mr Kenny said.

Finance ministers Wolfgang Schauble from Germany, Finland's Jutta Urpilainen and Dutch minister Jan Kees de Jager said in a statement that the emergency bailout fund - the European Stability Mechanism (ESM) - should have only a limited responsibility in the recapitalisation of banks.

But rejecting their position, Mr Kenny said a decision had been reached at the EU summit in June - at the time described as "a cosmic shift" - to separate Irish bank debt from sovereign debt.

"The decision taken by the European Council was made by the heads of governments of the 27," said Mr Kenny. "There was a very clear decision in two parts. One was to break the vicious circle between sovereign and bank debt. And two, to reflect on the capacity of Ireland to meet its debts, and that equal treatment would be given. Those decisions stand."

The three finance ministers issued the stark warning on the ESM following a meeting in Helsinki. They said: "The ESM can take direct responsibility for problems that occur under the new supervision, but legacy assets should be under the responsibility of national authorities."

Mr Kenny was forced to defend the Government's handling of negotiations on bank debt as Opposition parties claimed Germany, Finland and the Netherlands have smashed Ireland's progress and hopes to secure a restructuring of its bank debts.

The ESM is set to go into operation next month.