Noonan keeping legacy bank debt on table until next crisis

Does anyone still think we are going to do a deal with Europe on our legacy bank debt? Hardly a week goes by that some European official or politician doesn't rule it out and the Government, normally in the form of "That link has never been made to me and I am a few years going out to Europe," Noonan said.

On Wednesday Noonan followed up by telling the Oireachtas finance committee that we would be making an application to the new ESM for some money once it is established in November. He was vague about the timing.

“There’s always a whether about the timing, and we’ll take advice on that, and that’s the position we’re in,” he said, whatever that means.

On Thursday the head of the eurogroup, Jeroen Dijsselbloem, poured yet more cold water on the idea that we might get some debt relief. "Technically speaking it would be possible. Politically it would be difficult," he said following an annual general meeting of the ESM's board of governors in Luxembourg.

And so the dialogue of the deaf continues.

Its tempting to suggest that the media is to blame. If we did not keeping asking European politicians if Ireland is going to get debt relief they would not say no and the Government would not have to come out and deny it.

But that is simplistic. The media may keep the story bubbling along but ultimately only the Government can kill it by publicly abandoning its ambition to try and hold Europe to a promise extracted two years ago .

However, the Government will not let it go, even though it is obviously irritating the other member states and inviting them to link the issue to the arguably far more important issue of corporate taxation.

The Government has at least two reason for doing this. One is self-serving but the other is valid.

The self-serving reason is that it simply could not give the Opposition such a gift. So much political capital has been invested in the commitment to retrospective recapitalisation “won” by the Taoiseach two years ago that admitting defeat is a non-starter.

Compromises

The more valid reason is that Europe works on compromises and more often than not these compromises are only made in the face of disaster. Certainly that has been the history of the response to the euro crisis.

Arguably the only thing that can be said about the future of the European project is that it will involve more crises and more late-night compromises.

When the next crisis will blow up is anybody’s guess. But the result of the European bank stress tests in the autumn is as good a possibility as any other.

It is the unpredictably of the next crisis that is behind Noonan’s coy reluctance to commit to a date to start the formal application process for ESM money.

The true value of the commitment two years ago to retrospective recapitalisation will only be realised in another late-night crisis meeting, and until that time the best option is to keep it firmly on the table, tedious as it may be to do so for all concerned.