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Angela Merkel's 'Dr No' makes Ireland's search for a bank debt deal much harder

Analysis: Dr Joachim Pfeiffer’s visit to Dublin this week was not a pleasant one for Enda Kenny.

Dr Joachim Pfeiffer in Dublin this week
Dr Joachim Pfeiffer in Dublin this week
Image: Maxwell Photography

“THERE ARE A lot of special cases,” Dr Joachim Pfeiffer laughs when Angela Merkel words about Ireland’s debt situation were put to him yesterday.

Pfeiffer was in Dublin with the German-Irish Chamber of Industry and Commerce for a few days this week and the message he brought was not one Enda Kenny and the government would’ve wanted to hear.

As the economic policy spokesperson for Merkel’s Christian Democrats party he was unequivocal in his view that the new permanent eurozone bailout fund, the European Stability Mechanism (ESM), CANNOT be used for legacy bank debt.

In fact he communicated this directly to Kenny in discussions on Thursday, but Kenny understandably does not share his view.

Pfeiffer will freely admit he is just a parliamentarian and not a German government spokesperson but he said his view is shared unanimously amongst his parliamentary colleagues.

And so Ireland’s long campaign to recoup some of the €25 billion it pumped into the State’s pillar banks, AIB and Bank of Ireland, at the height of the economic crisis continues and shows no sign of being resolved any time soon.

Break the link

Since EU leaders agreed in June 2012 to break the link between sovereign and bank debt Ireland has been seeking to have this applied retrospectively to its legacy bank debt so as that Ireland would get something of the €25 billion it pumped into AIB and BOI back, easing a debt burden that stands at over 120 per cent of gross domestic product.

Much hinges on putting in place the structures to make an application to the ESM and the government believes this won’t happen until later this year or possibly early next year.

Occasionally Kenny has sought to remind Europe that Ireland has taken a big hit in terms of tax rises and expenditure cuts in order to save its banking system and now it would like something in return.

Enda Kenny-Joachim Pfeiffer - Ralf Lissek_low res Pfeiffer, the Taoiseach and Ralf Lissek, CEO of the German Irish Chamber, at Government Buildings this week

Last October he wrote to the heads of all 27 (as it was then) EU states saying it “remains imperative” to break the link between sovereign and bank debt.

“That shared task, indeed all the commitments we made then, remain to be fulfilled and are important for ensuring that Ireland’s return to full market financing is sustainable and that Ireland can be a durable success story for the entire Eurozone,” Kenny wrote at the time. 

Then in December he admitted that the government would miss his own target on getting a deal but that he hoped that the structures would be in place by later this year paving the way to make further progress. Whether that happens remains unclear.

Kenny said last December: “So, I would like to think it could get to a point where our issue of what happened in Ireland’s case in terms of the possibility of recapitalisation could be on the table.”

‘No hope’

But all the noise from our European partners – who must unanimously agree to a deal for Ireland – have not been promising. Merkel herself said nearly two years ago that a deal would not be possible before Kenny got her on the phone and a joint statement said Ireland was “a special case”.

But Pfeiffer believes this theory doesn’t hold water and that the ESM is simply “not the right instrument”. His comments about their being “no chance” and “no hope” of a deal made headlines in newspapers yesterday morning but it was nothing new for him.

“For me, I only spoke out on what was for me clear. It’s not news from my point of view, it’s not news,” he said.

When it was put to him that the government maintains under its interpretation of the ESM rules that there is scope for dealing with legacy debt he laughed heartily and said: “Wait and see.”

“I am member of the German parliament. I am not the CEO of the ESM. For me personally it’s a clear position,” he added.

When she was elected Labour leader and Tánaiste earlier this month, Joan Burton said that Ireland has unfinished business when it came to legacy bank debt and resolved to recommit to getting a deal in Europe.

But Pfeiffer’s comments yesterday are indicative of just how hard it will be for Ireland and if he gets his way, it will ultimately be impossible.

When asked if Merkel shares his views, he responded: “I think so yeah.”

Merkel ally: I told Enda Kenny that Ireland has no chance of a bank debt deal

Read: After opening a Penneys, Enda Kenny spoke to his ‘good friend’ Angela Merkel about bank debt

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About the author:

Hugh O'Connell

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