Minister for Finance Michael Noonan is expected to enlist the support of the European Parliament for Ireland's campaign for debt relief on its legacy banking debts, when he meets senior MEPs in Dublin this week.
A delegation from the Parliament’s economic and monetary affairs committee (ECON) , which includes Irish MEP Gay Mitchell, arrive in Dublin on Thursday as part of their ongoing inquiry into the workings of the troika.
The committee, which announced the probe late last year amid concerns about the democratic accountability of the troika system, will hold meetings with the Minister for Finance and Minister for Public Expenditure Brendan Howlin, Central Bank governor Patrick Honohan, IBEC and the ICTU.
Bondholders
In a letter sent by the Minister for Finance to committee chair Sharon Bowles in response to a series of written questions from the Committee and seen by The Irish Times, Minister Noonan states several times that the option of involving senior bondholders in the resolution of Irish banks was prevented by the troika. Ireland would continue to explore ways of reducing its legacy bank debt, he says.
“It should be noted that 30 per cent of the existing debt to GDP ratio (as of September 2013) relates to the bail-out by the Irish government of the Irish banks. At the time of our banking crisis the option now being seen at a European level – bailing-in the senior bondholders – was not available to the Irish authorities and meant that the burden had to be shared by the equity holders, the junior bondholders, and particularly the sovereign which latter ultimately meant the Irish taxpayer.”
The argument that Ireland’s significantly high debt to GDP ratio of almost 120 per cent means that it needs further debt relief has emerged in recent months as a key strand of the Government’s campaign to secure support on legacy bank debt.
Entitlement
Mr Noonan's letter is dated December 20th – a day after European Commission president Jose Manuel Barroso appeared to question Ireland's entitlement to further debt relief at last month's summit of EU leaders. Speaking earlier this week at the start of the EU Council presidency in Athens, he again referred to Ireland's success in exiting the programme as proof that the EU's response to the crisis worked.
“Ireland was able to issue long term debt at lower levels than countries in the euro area that did not request a financial programme. . . It is a very clear demonstration that programmes work provided they are implemented with determination, and in the right way.”
While any decision on the application of direct bank recapitalisation by the ESM fund to legacy debts will not be possible until at least the end of this year when the Single Supervisory Mechanism is in place, Minister Noonan is expected to set out the state of play to the European Parliament delegation regarding EU leaders’ commitment of June 2012 to examine the case of Ireland specifically.
Speaking last night Fine Gael MEP Gay Mitchell said: "A lot of decisions by the troika were taken outside the normal democratic process as they had to act, but we would expect the Commission, the ECB and the IMF to have kept detailed records. We want them to tell us how they discharged their responsibilities."
