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Taoiseach: Deal not a second bailout

Friday, October 26 15:45:32

Should the ESM be used to back up Ireland's banks directly, it would not amount to a "second bailout", the Taoiseach said this afternoon.

He was responding to comments by a spokesman for Chancellor Angela Merkel's CDU party, who said new conditions would have to apply if the ESM was used in such a manner.

Under plans agreed at the June summit, the ESM will be able to provide recapitalisation directly to banks - ie, not through national governments - once the single banking supervisor is fully operational.

However, Chancellor Merkel said that "legacy assets" should remain under the responsibility of national authorities, implying that bank problems that are already being tackled would not be covered.

This would have a significant impact on the ability of Ireland and Spain to fight their debt crises.

At the moment, debt from bank recapitalisations remains on the state's balance sheets, but that would not be the case under the direct recapitalisation plan.

Since her statement last week, officials have attempted to play down the extent to which the remarks reopened the June agreement.

Today, Enda Kenny reiterated that part of the decision made by the European Council on 29 June was to recognise the special circumstances that apply in Ireland's case.

"This is not a sort of Troika bailout situation that applies now," Mr Kenny said.

"Ireland's banks have been recapitalised at the highest level, that is a matter of historical record, and that burden has been put on our public and on our taxpayers.

"That is why we're pursuing the decision made on the 29 June, to bring that to a reality which will ease our position somewhat."

Tanaiste Eamon Gilmore has said there is a clear understanding with the German government that it will co-operate in working through the issues relating to bank debt.