Friday

28th Apr 2017

Pressure building on Ireland to seek EU help

  • The General Post Office served as the headquarters during the 1916 uprising (Photo: Paola Farrera)

The European Central Bank told Ireland on Monday (15 November) that EU emergency funds can indeed be used to bail-out its debt-ensnarled banks, adding to the pressure on the country to finally access a European rescue mechanism.

Ireland continued to insist on Monday that it has no need of funding for government spending, but ECB vice-president Vitor Constancio said that a pool of monies set up by eurozone government for bailing out countries can be used for banks instead.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The EU facility was not set up to lend directly to financial insitutions, but the Irish government if it access the fund, can then decide to "use the money for that purpose," Mr Constancio said from Vienna.

Frustration in other European capitals at Ireland's reluctance to seek financial help from the EU and IMF also spilt out into the open on Monday as Portugal, trapped in its own debt whirlpool, all but demanded that Ireland reach out to Brussels.

Portuguese finance minister Fernando Teixeira dos Santos said in Dow Jones Newswires that: "I would not want to lecture the Irish government" but added "I want to believe they will decide to do what is most appropriate together for Ireland and the euro. I want to believe they have the vision to take the right decision."

For his part, Spain's member of the European Central Bank council, Miguel Angel Fernandez Ordonez openly attacked Dublin for its reticence.

"The situation in the markets in recent weeks has been very negative due in some way to the lack of a final decision by Ireland," he told reporters in Madrid on the same day.

Echoing the words of the Portuguese finance minister, he added: "It's not me who should take a decision about Ireland, it's Ireland that should take the right decision at the right moment."

Portugal and Spain are petrified that Ireland's stubbornness could lead to a contagion of lack of market confidence, as Spanish and Portuguese bond yields increase.

"From a strategic point of view, Madrid and Lisbon are worried that the uncertainty will spread to them, with ramifications for the euro as a whole," Tom McDonnall, an economic policy analyst with Tasc, an Irish economic think-tank, told EUobserver. "The ECB believes that if Ireland was in the fund, the uncertainty could be removed and thus lower bond yields."

"But for Ireland to go into the fund, this is effectively handing over sovereignty over fiscal levers. This is why you are seeing ministers making these comments about Ireland's struggle for sovereignty and so on," he explained.

On Sunday, enterprise minister Batt O'Keeffe said: "It has been a very hard-won sovereignty for this country and the government is not going to give over that sovereignty to anyone."

For Ireland, a country that fought a long, bitter struggle to free itself of British rule, to surrender economic sovereignty to the troika of the European Commission, the European Central Bank and the International Monetary Fund, as occurred when Greece tapped the EU fund, is an ignominious dishonour for any Irish government.

But for a one headed by Fianna Fail, whose full name in Irish translates as "Soldiers of Destiny - The Republican Party," such a move would be a historic humiliation for the party of the first president of the republic.

The government does have enough money to fund public expenditure through till July next year, but the yawning debts of Irish banks is steadily undermining confidence that the government will not be forced to default.

On Friday, fresh data showed that outstanding loans to Irish banks, mostly coming from German, British and French banks, climbed to €130 billion at the end of October, up from €119 billion in September.

That Ireland would be giving up its economic sovereignty to in effect transfer funds to, amongst others, British bankers, can only add to the indignity.

Brussels however denied that EU officials were adding to the pressure on Dublin.

"As the Irish authorities have reiterated themselves over the last few days, they have not made any request for financial assistance. Further, Irish sovereign debt is fully financed till the summer of 2011, so there is no imminent need on that area," commission economy spokesman Amadeu Tardio told reporters in the European capital.

"The commission is in close contact with the Irish authorities at the moment as you can imagine, but there is no news from that in itself."

If Dublin were to apply for help, the troika would likely demand very significant reductions in public sector pay and social transfers, albeit likely in line with those under consideration by the government.

More controversially, there will be pressure for Ireland to raise substantially its ultra-low rate of corporation tax as part of the overall policy mix.

However, the troika will have difficulty pushing through such a move, as Ireland won a series of legal guarantees, including notably on tax sovereignty, attached to the EU's Lisbon Treaty in return for a second referendum on the text, which was ultimately approved.

However, as some might argue, the Irish guarantees have yet to be approved.

Eurogroup makes 'progress' on Greek deal

Eurozone ministers endorsed an agreement in principle between the Greek government and its creditors over a new package of reforms. But talks on fiscal targets and debt could still block a final agreement.

New anti-trust complaint looms over Microsoft

At least three security software companies “met several times” with the European Commission to complain about Microsoft’s alleged abuse of its market position. A formal case could follow.

Commission stops German-British stock merger

The decision to block the merger of the London Stock Exchange and Deutsche Boerse was expected, as negotiations between the parties broke down a few weeks ago.

SMEs lack support in EU financial plan

The European Commission's plan for a capital markets union is said to be aimed at small and medium-sized enterprises, but many could end up being left out in the cold.

Eurozone chief in 'drinks and women' row

[Updated] The Netherlands' Jeroen Dijsselbloem faces calls for resignation after saying that crisis-hit countries in southern Europe spent "money on drinks and women" before being helped by others.

New anti-trust complaint looms over Microsoft

At least three security software companies “met several times” with the European Commission to complain about Microsoft’s alleged abuse of its market position. A formal case could follow.

Investigation

MEPs oppose EU agency to prevent Dieselgate II

The European Parliament said on Tuesday that there should be more EU oversight on how cars are approved, but stopped short of calling for an independent EU agency.

Stakeholders' Highlights

  1. ECR GroupSyed Kamall: We Need a New, More Honest Relationship With Turkey
  2. Counter BalanceParliament Sends Strong Signal to the EIB: Time to Act
  3. ACCARisks and Opportunities of Blockchain and Shared Ledgers Technologies in Financial Services
  4. UNICEFRace Against Time to Save Millions of Lives in Yemen
  5. Nordic Council of MinistersDeveloping Independent Russian-Language Media in the Baltic Countries
  6. Swedish EnterprisesReform of the European Electricity Market: Lessons from the Nordics, Brussels 2 May
  7. Malta EU 2017Green Light Given for New EU Regulation to Bolster External Border Checks
  8. Counter BalanceCall for EU Commission to Withdraw Support of Trans-Adriatic Pipeline
  9. ACCAEconomic Confidence at Highest Since 2015
  10. European Federation of Allergy and Airways60%-90% of Your Life Is Spent Indoors. How Does Poor Indoor Air Quality Affect You?
  11. European Gaming and Betting AssociationCJEU Confirms Obligation for a Transparent Licensing Process
  12. Nordic Council of MinistersNordic Region and the US: A Time of Warlike Rhetoric and Militarisation?

Stakeholders' Highlights

  1. European Free AllianceEFA MEPs Vote in Favor of European Parliament's Brexit Mandate
  2. Mission of China to the EUXinhua Insight: China to Open up Like Never Before
  3. World VisionViolence Becomes New Normal for Syrian Children
  4. International Partnership for Human RightsTime to Turn the Tide and End Repression of Central Asia's Civil Society
  5. European Free AllianceAutonomia to Normalnosc - Poland Urged to Re-Grant Autonomy to Silesia
  6. UNICEFHitting Rock Bottom - How 2016 Became the Worst Year for #ChildrenofSyria
  7. Malta EU 2017Green Light Given for New EU Regulation to Bolster External Border Checks
  8. ACCAG20 Citizens Want 'Big Picture' Tax Policymaking, According to Global Survey
  9. Belgrade Security ForumCall for Papers: European Union as a Global Crisis Manager - Deadline 30 April
  10. European Gaming & Betting Association60 Years Rome Treaty – 60 Years Building an Internal Market
  11. Malta EU 2017New EU Rules to Prevent Terrorism and Give More Rights to Victims Approved
  12. European Jewish Congress"Extremists Still Have Ability and Motivation to Murder in Europe" Says EJC President