Noonan not worried by Schaueble comments on ESM

Minister for Finance Michael Noonan has said he is not concerned by comments made by Germany's finance minister that there is "little leeway" for the eurozone's bailout fund to be used to deal with legacy bank debt.

Wolfgang Schaeuble was speaking in Luxembourg, where eurozone finance ministers are considering the rules by which the European Stability Mechanism will take a stake in troubled banks.

Asked by German journalists about Ireland's campaign on legacy debt, Mr Schaeuble cautioned that the ESM was "very limited" and there was "little leeway" for legacy debt.

Mr Noonan said the comments "sounded kind of optimistic" to him because Mr Schaeuble did not rule out the concept.

He added: "If there's leeway, there's leeway. And we've always argued that Ireland was an exceptional case.

"We're not arguing in this case for all our colleagues in the eurozone. We're arguing the case for Ireland."

Mr Noonan said: "I agree with Wolfgang [that] the scope is narrow, because there aren't other countries that were refused to do something, as a policy issue, which is now being advocated.

He said: "And we're saying, in effect, that we were forced into a position by the ECB - where we were not allowed to bail-in senior bondholders.

"If the ESM rules, which are now emerging, were in place two years ago to recapitalise the banks, the ESM would have assisted in recapitalisation. And that's our case for retrospective application."

Ministers discuss ESM strategy

The finance ministers are trying to decide on when and how the ESM can invest in a bank to save it from failure.

Eurozone leaders want the ESM to be able to become a shareholder in a failing systemically important bank.

The move could prevent the expense of saving the bank falling on just one government that may already be struggling with huge debts.

At the meeting, the last under the Irish presidency of the European Council, ministers will also set guidelines for how much a government would have to contribute to such a bank rescue.

It would also set guidelines to which banks would be eligible and who would lose money in the process.

Finance ministers are also expected to approve a seven-year extension to both Ireland's and Portugal's bailout loans and formally endorse Latvia joining the eurozone in January.

Taoiseach to discuss banking union with Merkel

Taoiseach Enda Kenny has said he will discuss progress towards an EU banking union with Chancellor Angela Merkel at a meeting of the centre right group of European leaders in Vienna.

France and Germany have signalled that want to delay a decision on whether or not the EU's permanent bailout fund can be used to directly recapitalise banks.

The Government regards that option as a key method of breaking the link between sovereign and bank debt, a position taken by EU leaders at a summit in Brussels a year ago.

Arriving in Vienna, Mr Kenny said: "Clearly that decision was made last year, that hasn't changed, it's necessary now to be seen to be implementing it.

"Everybody understands that this is a fundamentally important part of the financing of the European Union. We need to be able to send out a signal about the credibility of the [European] Council in terms of following through and implementing the decisions that have been taken."

The main elements of a banking union consist of a new supervisory role for the ECB, the question of directly recapitalising banks using the ECB, the creation of a harmonised system of winding up troubled banks, or recovering their salvageable assets, and a new harmonised method across the 27 EU member states of creating a fund, initially raised by the financial industry, to backstop stricken banks.

The latter element is reflected in a European Commission directive currently being negotiated under the Irish presidency.

A recent position paper by France and Germany suggested that clarification on direct recapitalisation of banks should not be reached until the other elements are in place, which suggests that it will be autumn at the earliest that clarity will be reached.

Last December, EU leaders mandated finance ministers to clarify the methodology of direct recapitalisation of banks by the end of June.

The Franco-German position suggests that deadline will now be missed.

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Noonan not worried by Schaueble comments on ESM

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