Ireland will continue to discuss burden-sharing with senior bond holders, says Tánaiste

MINISTER FOR foreign affairs Eamon Gilmore has said calls for a new European rating agency indicate a growing realisation in the euro zone that putting problem countries into “quarantine” will not solve the financial crisis.

Mr Gilmore said an “independent, authoritative and objective” rating agency with transparent working procedures could challenge the “loose market sentiment” that he said passed for analysis among established companies.

After talks with his German counterpart, Guido Westerwelle, the Tánaiste said Ireland would continue to discuss burden-sharing with senior bond holders, despite opposition by the European Central Bank.

“It is something that we’ve always said that we will discuss with the ECB,” said Mr Gilmore. “That is something that we intend to do.”

During a joint press conference Mr Westerwelle spoke of his “great respect and recognition” for Ireland’s reform efforts and Berlin’s wish for a new, independent rating agency.

“The current discussion shows the need for a neutral, independent rating agency in Europe that will examine financial markets in an unjaundiced fashion using the same technical criteria internationally,” said Mr Westerwelle.

“I see it necessary to create an agency. To guarantee its independence one could create a foundation model. No doubt this is something we will need to discuss.”

Mr Gilmore said EU leaders had finally realised that they needed to find linked-up solutions to the euro zone’s interdependent problems.

“I think if you roll the clock back 12 months or more, there a feeling of ‘this has nothing to do with us, they’ve got a problem it’s not our responsibility’,” said Mr Gilmore.

“We have a greater understanding now that debts in one country are owed to banks in another country and therefore there is a mutual interest at that level in working them through.”

An independent rating agency in Europe would, he said, help return some stability to European markets.

After two rating agencies said they were unlikely to downgrade the status of Ireland’s sovereign debt, Mr Gilmore said Mr Westerwelle’s call carried weight because Germany enjoys the best, triple-A rating.

The Minister said Germany’s concern with this weeks downgrade, and the rating agency behind it, showed a new level of solidarity in the euro zone.

“When you think about it, it is an incredible power for ratings agencies to have that they can pronounce on the creditworthiness of sovereign states, purely, it would seem to me, based on sentiment.”

He said it was not clear whether objective criteria were used in the ratings or if rating agencies had links to elements of the financial markets.

Mr Gilmore said the government was “acutely conscious” that financial support to the state from the ECB and euro zone partners was linked to public perceptions in Europe, particularly over the corporate tax issue.

He said there were “ongoing discussions” between finance ministry officials in Dublin and Berlin that would hopefully reach agreement on reducing the interest on EU-IMF loans.

“I think we’ve been very clear that what is not up for discussion is our rate of corporate tax and I think every state in Europe now accepts that,” he said.

The Tánaiste said he felt “very reassured” at the “very strong support” from Berlin for its reform efforts.