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Bundesbank unhappy with Irish deal

Monday, February 18 14:29:18

Germany's central bank, the Bundesbank, today said that Ireland's Promissory Note deal is "problematic".

"The procedure proves the increasingly stronger and more problematic inter-linkage between monetary and fiscal policy in the European monetary union," the Bundesbank said in its monthly report today. "The European Stability Mechanism, which should be responsible in this regard, has been established to provide any help to individual member states in servicing debt."

The statement adds to fears that the Prom Note deal could unravel.

But Minister for Social Protection Joan Burton rejected suggestions that the promissory note deal is in danger from a revaluation by European authorities, saying it was "generally recognised" that the agreement was helpful to Ireland and the European Union.

The ECB is re-examining Ireland's "prom deal" after ECB member Jens Weidmann last week said that he was "very concerned" the deal to liquidate IBRC and spin out the Anglo promissory notes might contravene EU law.

He said that the deal came perilously close to illegal monetary financing, while former ECB president Jurgen Stark said the arrangement contravened EU Treaty rules.

Minister Burton this morning said that she did not believe there was any doubt over the legality of the Prom deal.

"I don't believe there is such uncertainty. I understand that there are concerns in certain quarters and that a number of people have expressed their view. but we have a point of view as do most countries across the EU in relation to the crisis - and the existential crisis for the EU of so many people in so many countries being unemployed."

"I think it is generally recognised that the deal for Ireland has been helpful for Ireland. It's positive and it's promising. and I expect what the ECB will be looking to is to how Ireland actually benefits then from the greater flexibility and the greater room for manoeuvre that the deal gives us."

"I think the troika, no more than myself, must be very, very aware of the difficult news that unemployment in the euro zone countries is at 11 per cent and overall in the EU at 10 per cent. They are shockingly high figures, and in Ireland it's 14.6 per cent," Ms Burton said in Dublin this morning.

"The critical thing is the promissory note deal gives Ireland a small bit of extra leeway in relation to helping people get back to work and I would like to see the Budget framed in the context of helping people get back to work, and we have that bit of extra leeway from the promissory note deal."