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French Finance Minister Pierre Moscovici scratches his head during the Eurogroup meeting Yves Logghe/AP/Press Association Images
bank debt

Eurozone: Irish bank debt will be re-examined by autumn

European ministers have also rubber-stamped an initial €30billion bailout for Spain.

EUROZONE FINANCE MINISTERS meeting in Brussels have agreed to review Ireland’s bank debt by the autumn.

After nine hours of talks which focused on agreeing details of the Spanish bailout, EU Commissioner Olli Rehn announced that a timeline for re-examination of Ireland’s banking debt had also been set.

The Government has repeatedly expressed its hope that loans given to Irish banks could be removed from the national debt, lightening the repayment load on the taxpayer.

A decision on this will be taken by October, Rehn said. RTÉ correspondent Paul Cunningham tweeted:

Meanwhile, the finance ministers agreed to offer Spain €30billion this month to help its distressed banks .

After nine hours of talks, Jean-Claude Juncker, the Luxembourg premier who also heads the Eurogroup , said a memorandum of understanding for Spain would be formally signed “in the second half of July,” with €30billion available by the end of the month.

Juncker, who has been in the job since 2005, was reappointed by the 17 ministers during talks beginning yesterday which ended well after midnight.

Spain, under increasing pressure as sceptial markets pushed its borrowing costs dangerously high again, had called for up to €100billion in direct aid at a June 28-29 “breakthrough” EU summit.

Aiming to keep the momentum going, ministers also agreed to extend a deadline for Spain to cut its public deficit to the EU 3.0 per cent limit by one year to 2014 because of the difficult economic conditions Spain faces.

At the same time, however, Juncker stressed that Madrid must implement measures needed to bring its public finances into line with EU norms.

No guarantees

EU economic affairs commissioner Olli Rehn said Spain’s public deficit – the shortfall of revenue to spending – was now expected at 6.3 percent of Gross Domestic Product this year, 4.5 percent in 2013 and then 2.8 percent in 2014.

Spanish Prime Minister Mariano Rajoy announced on Saturday that he would take additional steps soon to cut the public deficit and said “Europe must fulfil the accords as swiftly as possible.”

The June summit agreed that the ESM will be able to inject funds directly into needy banks, conditional on a new European bank regulator being put in place, so as to avoid adding to the debt burden of the affected state.

Asked if such a state would have to provide guarantees on such bank funding, Juncker answered with a simple “No.”

- Additional reporting by Michael Freeman

– © AFP, 2012

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