Taoiseach Enda Kenny has said an EU agreement to bring down borrowing costs for indebted nations will ease the burden on Ireland’s taxpayers.
European leaders threw a lifeline to Spain by agreeing that its failing banks should have direct access to EU bailout funds without adding to its government’s debts.
Mr Kenny described the deal, struck overnight, as a seismic shift in European policy that would allow Ireland to re-engineer its overall debt level.
“What was deemed to be unachievable has now become a reality and that principle has been established and decided and agreed upon by the council, by the heads of government,” he said in Brussels.
“But for us the more immediate impact is that Ireland is named as getting equal treatment as other countries with difficulties here.
“That means that heads of government’s decision will now be referred to the eurogroup [of eurozone finance ministers] for an analysis of how best this might be used in Ireland’s case to re-engineer the debt burden that is on our taxpayer, which is what we set out to do.”
Mr Kenny said the new deal means Ireland’s overall debt burden, including the bank debt, can be re-engineered in a way to give Ireland equal treatment to Spain and any other countries which avail of the new system.
“In the case of countries that are going to be involved here, where funding is made available through the EFSF it will later be transferred to the ESM, and that is also the case in reference to Spain,” he continued.
“All of that work will now be referred for detailed analyses by the eurogroup, but the fundamental principle of the ESM providing funding to break the link between sovereign and bank debt has now been agreed by the heads of government.
“It allows in Ireland’s case the opportunity to re-engineer, in a variety of ways, the debt burden on our taxpayers which is what we sent out to do.”
The agreement by the leaders of the 17 eurozone nations came after German chancellor Angela Merkel appeared finally to relent in the face of concerted pressure.
Spanish prime minister Mariano Rajoy and Italy’s Mario Monti made clear they would block further progress at the summit unless they received assistance to curb their soaring borrowing costs.
Crucially, they appeared to have been backed by French president Francois Hollande, attending his first EU summit, who has said tough austerity measures to cut deficits must be backed by support for growth.
The “breakthrough” was announced by European Council president Herman van Rompuy after British Prime Minister David Cameron and the leaders of the other nine non-eurozone members had left the summit, leaving the single currency bloc to thrash out a deal.
The summit had expected to focus on a 10-year road map for reform of the eurozone setting out proposals for a banking union, fiscal union – leading ultimately to political union.
A report fleshing out the details of the plan will now be delivered to the next EU summit in October.
Tánaiste Eamon Gilmore described the deal as a massive breakthrough for Ireland which breaks the link between the crippling bank debt and the State.
“This really changes the game for us as far as bank debt is concerned,” he said.
“Ireland has had to bear the burden of the losses in the banks, the enormous bank debt that has been on the Irish taxpayer.
“The way of breaking that link will now be applied to Ireland.
“It will enable this country to recover much faster than was the case up to now.”
Mr Gilmore said that while the word “retrospective” is not in the deal, he believed it would be backdated to take account of Ireland’s crippling bank debt.
“The discussions that we have been having on this do mean that whatever is agreed is applied retrospectively,” he said.