Belfast Telegraph

Prospects of bailout rift recede

The prospect of a rift between the Irish and German governments over efforts to cut a deal on Ireland's 64 billion euro bank bailout appear to have receded after both administrations moved to clarify their positions.

Dublin's bid to ease the burden of its outstanding debt were thrown into uncertainty on Friday after German Chancellor Angela Merkel indicated that debts racked up in the past would not be covered by a new emergency fund to recapitalise banks.

Her claim that the envisaged European Stability Mechanism (ESM) would be limited to future debts and would not be used for "backdated recapitalisation of Eurozone banks" seemed to cast doubt on an agreement struck by European leaders in June that potentially would have seen Ireland's repayment terms on its own bailout improved.

Mrs Merkel's comments at a European financial summit in Brussels appeared to have set her on a collision course with Taoiseach Enda Kenny, who had earlier insisted that his European counterparts had reaffirmed the June position.

Amid fears of a stand-off, the German government issued a statement stressing it would work closely with Ireland to "improve the sustainability of the Irish programme".

In response, a spokesman for the Irish Government said the German statement represented a "clear affirmation of support for Ireland's position".

Mrs Merkel's remarks at a news conference came in response to a question related to indebted Spanish banks.

It is understood the Irish authorities have since received assurances the Chancellor's comments were specifically about Spain and did not relate to the Irish bailout programme.

Saturday's German statement did not take a definitive position on the ESM and legacy debt.

However, the Irish Government spokesman insisted the Dublin administration had never been prescriptive on the timetable for a deal or on the specifics of how legacy debt should be dealt with.

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