ANY EUROPEAN bailout scheme for Spain’s banks which does not increase the country’s national debt would be examined with “great interest” by the Government, Minister for Finance Michael Noonan said.
Such an approach has already been mooted by International Monetary Fund managing director Christine Lagarde and Central Bank of Ireland governor Patrick Honohan.
Mr Noonan said Dublin continued to seek a concession to cut the cost of the Anglo Irish Bank promissory note scheme, but an “alternative approach” would be pursued if no deal was possible to restructure Anglo debt. He was speaking in Brussels as he arrived for two days of talks with his euro zone counterparts. High on the ministers’ agenda is a Spanish initiative to boost the country’s stricken banks.
Madrid insists it can rescue the banks without external assistance, but Mr Noonan said there were “gaps” in a Spanish paper circulated before last night’s meeting. “Obviously the situation in the Spanish banking system will be discussed,” he told reporters.
“I was very taken by the speech that Christine Lagarde made about two months ago where she said that if intervention were required in Spain it should be focused on the banking system and that any aid given should not get transferred across and become part of the sovereign debt.”
He continued: “Now, she seemed to be outlining a new IMF policy position. Many people have echoed that since. So if it were to go along that line I think that would be an interesting policy development.”
Asked if such an initiative might set a precedent for Ireland, the Minister said: “We’d watch it with great interest, that’s what I would say to you.”
Ms Lagarde was setting out an IMF policy position in relation to the possibility of European Financial Stability Facility or European Stability Mechanism aid to Spain, he said. It was “not that the IMF would be the source of the fund but that the European funds would be the source of the funding” for the Spanish banks.
Asked if a similar plan might be potentially more attractive than a promissory note concession, Mr Noonan said a speech by Mr Honohan in which he echoed Ms Lagarde’s remarks was interesting.
“Always in these situations something can look very good in principle and it’s when you see the detail you can see whether it would be helpful to Ireland or not. And so far we don’t have any detail.”
The Minister expressed the hope “an alternative approach which would give the same effect in reducing the burden of the legacy debt which was imposed on us” would be adopted if the promissory note campaign was unsuccessful.
