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Noonan and ECB clash on debt deal

Wednesday, September 12 14:11:27

Ireland and the European Central bank disagree on the best way to cut the country's legacy bank debt but a deal may be secured by December, finance minister Michael Noonan was quoted as saying today.

Euro zone leaders agreed at a summit in June to look at improving Ireland's bank rescue, a commitment that has pushed Irish bond yields down and allowed the Government to raise long-term debt for the first time since its EU/IMF bailout two years ago.

The Government wants the terms tied to E31 billion of IOUs pumped into two failed banks - Anglo Irish and Irish Nationwide - to be eased and Europe's rescue funds to take over its stakes in other lenders.

But Mr Noonan said there was disagreement with the ECB on how to replace promissory notes used to finance the now defunct Anglo Irish Bank.

"It's an open secret that the Irish position and the ECB position aren't totally aligned, but technical work continues," Noonan told RTE during a trip to Paris.

The International Monetary Fund said yesterday that IOUs should be replaced by long-term government securities rather than European rescue funds, saying that a bond would avoid adding to debts that markets may consider senior.

Minister Noonan said today that the ECB disagreed with the IMF view, but that the Irish government had not made a decision on which it would prefer.

He told RTE it was not clear if a decision would be made by the end of October, a timeline suggested EU Economic Affairs Commissioner Olli Rehn, and that the government would like a deal by December.

"It might be in the Irish interest if the timeline were extended somewhat" to see what deal Spain secures on bailout funds for its banks, Noonan was quoted as saying.