Sometime around the middle of last year the previous government finally started to back away from any pretence that it was likely to be able to get any formal debt relief from Europe in relation to the money spent bailing out the banks. Yesterday, no doubt sensing that discussions on Greece were likely to raise the issue again, Minister for Finance Michael Noonan firmly ruled out any idea that Ireland would seek any debt relief itself, whatever happened with negotiations now getting under way with Greece. Ireland has "got what we wanted", he said, having got extended maturities on our EU bailout loans and a refinancing of IMF borrowings.
It is far from clear whether Greece will get any relief on its debt pile – EU finance ministers have made clear that a write-down of the amount owed is not on the cards. Some change in payments dates and costs could be negotiated, in effect lowering the real debt burden, though even this will be far from easy.The IMF analysis that Greece needs debt relief is bang on, but that does not mean it will happen. Noonan will argue that Ireland has already benefited from loan extensions, though in truth the initial terms on offer from the EU funds were onerous. He is correct that the idea of seeking some kind of retrospective recapitalisation from the EU of Ireland's banks is now not a runner. Most of the State's shares in Bank of Ireland are already sold – and the gradual sale of the State's stake in AIB to the market is likely to recoup more cash than any EU deal.
Ireland did make some ground. The ECB made a grudging concession in allowing Ireland to tear up the promissory note and replace it with long-term debt, easing the repayment terms. The move by the ECB to support euro zone debt markets has also been hugely advantageous to Ireland, helping us to raise new debt at rock bottom costs and lowering the overall costs of our annual debt servicing.
But any deal with Greece – if one is reached – will be ring-fenced. Ireland, as one of Europe’s better performing economies, is not going to be getting any write-offs.
