THE GOVERNMENT will have to pay a €3.1 billion bank debt due within days after the European Commission ruled out delaying the payment in anticipation of a deal to ease Ireland’s banking debt.
The commission’s stance, which mirrors that of the European Central Bank, means the Government will have no option but to pay the bill when it falls due on March 31st.
The money must be repaid under an EU-backed arrangement under which Dublin is recapitalising the former Anglo Irish Bank and the former Irish Nationwide Building Society with expensive IOUs known as promissory notes.
The Government has campaigned for months to restructure this costly scheme, which will see the State pay €47.4 billion in capital and interest charges to support these institutions – now known as Irish Bank Resolution Corporation – for 20 years.
Talks are ongoing but no breakthrough is imminent, leading Irish officials to examine whether the looming payment could be delayed until the negotiation is completed.
In Brussels yesterday, however, EU economics commissioner Olli Rehn rejected that notion and said in unambiguous terms that the Government was obliged to meet all its debts. “I actually wonder why this has to be asked at all because the principle in the European Union and in the long European legal and historical tradition is, in Latin – pacta sunt servanda – respect your commitments and obligations,” the commissioner told reporters.
“The European Union is a community of law and that assumes by definition that each and every member state respects the commitments it has undertaken and this is valid in the case of Ireland as well. Any possible negotiation on the medium- to long-term solution is a separate issue.” Mr Rehn’s forthright rejection of any postponement came only one day after Minister for Finance Michael Noonan left open that possibility, saying it was a long way to the end of the month and that nothing was ruled in or out at this point.
In European circles, such remarks by the Minister were quickly dismissed as “wishful thinking”. The bank debt question is highly sensitive for the Government given the upcoming referendum on Europe’s new fiscal treaty. In recent days, Taoiseach Enda Kenny and Tánaiste Eamon Gilmore have rejected claims by Minister for Social Protection Joan Burton that Ireland should be given a concession on the debt to boost support for the referendum.
A Government spokesman refused to comment on Mr Rehn’s views last night, saying the issue of the promissory note was one for the troika. He said the Government would wait and see what the troika recommended and would not be commenting before that.
Separately, Government sources insisted that there had never been a strong expectation that the promissory note issue would be resolved by the end of March.
Sinn Féin president Gerry Adams called on the Taoiseach to declare the State’s inability to pay the promissory notes.
As he left Brussels yesterday after two days of talks on the financial crisis, Mr Noonan said the Irish bank debt question had not featured on the agenda when EU finance ministers gathered. He also said he did not expect the issue would be on the table when the ministers next meet in Copenhagen at the end of this month.
“I bring it up in bilaterals all the time. You know the meetings adjourn, meetings break, you sit down and talk to colleagues and everybody tells each other their difficulties and it comes up like that,” he said. Mr Noonan rubbished the suggestion that a concession granted to Spain to ease its deficit-cutting target this year meant that double-standards now apply in the euro zone.
“Spain is not comparable with Ireland. Spain is not in a [bailout] programme,” he said. Spain’s position is different but their targets haven’t been softened. They’re bringing in a budget at the end of April and the destination is to get to the end of 2013 and have a deficit of 3 per cent or so over a 20-month period,” he added.
