Michael Noonan last night pressed Europe to come good on its pledge to provide direct aid to stricken banks as euro zone finance ministers sought to settle an entrenched schism over the scope of the plan.
Crucial here is the contentious question of the ESM, the EU’s permanent bailout fund, paying for “legacy” debts.
Although Mr Noonan fleshed out some of his thinking as he arrived for two days of talks in Brussels, divisions with other countries were clear as Austria dug in against the notion of the ESM taking retrospective responsibility for banking losses.
Gathering for the first time this year, ministers elected Dutch minister Jeroen Dijsselbloem as president of the eurogroup in succession to Jean-Claude Juncker of Luxembourg.
Objections
Mr Dijsselbloem was a shoo-in for the job after overcoming the objections of France and Spain in recent days.
Consensus was absent, however, on the question of ESM bank aid, which is central to the stalled drive to sever the link between bank and sovereign debt.
The latest effort to forge a common position comes six months after EU leaders agreed in principle to allow the ESM to rescue banks directly, something which has divided euro zone countries ever since.
“We ll be arguing what we understood the situation of the 29th of June: banks that were still functioning, lending trading banks would be eligible even though insolvent banks on wind-downs mightn’t be,” Mr Noonan told reporters.
Such an initiative may provide a window for the ESM to take direct equity stakes in AIB, Bank of Ireland and Permanent TSB, a central element of the campaign for debt relief.
This is opposed by Germany, Finland and the Netherlands. It is separate to the push to recast the Anglo Irish Bank promissory note scheme. Mr Noonan said it was too early to talk about the specific amounts of money that might be in play in any ESM rescues, saying the discussion was still centred at the level of the guiding principles.
Irish banks
“My particular input will be that these policy instruments, when they’re put in place, should apply to banks that are still trading,” the Minister said.
“If you look at the monies that were put into the Irish banks by the State taxpayer, it falls into ordinary shares, preference shares and CoCos,” he said in reference to convertible contingent notes.
“The total value thus far of preference share and CoCo investments was €7 billion. I wouldn’t be adverse to selling the preference shares and contingent capital on par, if you take out what the taxpayer put in. We’re not trying to make a profit on that, as long as we break even,” he said. There were residual, normal equity stakes in the banks after that.”
While the ESM remained neutral on whether it would recapitalise by taking equity shareholdings, Mr Noonan said there would have to be a value on such shareholdings.
