Thursday

1st Oct 2020

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.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

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.

EU countries stuck on rule of law-budget link

Divisions among EU governments remain between those who want to suspend EU funds if rule of law is not respected, and those who want to narrow down conditionality.

MEPs warn of 'significant gaps' in budget talks

The budget committee chair said the European Parliament expects tangible improvements to the package in its talks with member states - while the German minister argued that the EU leaders' deal was difficult enough.

Top EU officials urge MEPs give quick budget-deal approval

MEPs criticised the EU deal on the budget and recovery package clinched by leaders after five days of gruelling talks, saying it is not enough "future-oriented", and cuts too deeply into EU policies, including health, innovation, defence and humanitarian aid

EU Parliament gears up for fight on budget deal

European parliament president David Sassoli said certain corrections will have to be made in the budget, citing research and the Erasmus program for students, calling the cuts "unjustified".

EU leaders agree corona recovery after epic summit

After gruelling five-day talks, EU leaders agreed on €390bn in grants and €360bn in low-interest loans to hardest-hit member states - after much opposition from the Dutch-led 'frugal' bloc of countries.

News in Brief

  1. Polish MEP defects to Greens from Socialists & Democrats
  2. Finally a federal government agreement in Belgium
  3. Auditor appeals for EU funds on child poverty
  4. British MPs get behind controversial Brexit bill
  5. France admits Covid-19 app low take-up
  6. UK sanctions Belarus leadership
  7. Poland introduces new Covid-19 rules but no lockdown
  8. Turkey reportedly downs Armenian fighter jet

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council meets Belarusian opposition leader Svetlana Tichanovskaja
  2. Nordic Council of MinistersNordic Region to invest DKK 250 million in green digitalised business sector
  3. UNESDAReducing packaging waste – a huge opportunity for circularity
  4. Nordic Council of MinistersCOVID-19 halts the 72nd Session of the Nordic Council in Iceland
  5. Nordic Council of MinistersCivil society a key player in integration
  6. UNESDANext generation Europe should be green and circular

Latest News

  1. Celebrate with us. EUobserver's 20 years of independent EU news
  2. Ban on Catalan leader condemned as 'disproportionate'
  3. EU defends Jourova over Hungary's resignation demand
  4. A 'geopolitical' EU Commission. Great idea - but when?
  5. The EU's new rule of law report - pushing at an open door?
  6. EU tries to avoid lockdowns as global death toll reaches 1m
  7. Reports: Turkey sent Syrian fighters to Azerbaijan
  8. German presidency tries to end EU's rule-of-law battle

Stakeholders' Highlights

  1. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  2. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  3. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  4. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  5. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis
  6. UNESDACircularity works, let’s all give it a chance

Join EUobserver

Support quality EU news

Join us