Kenny and Rajoy urge EU leaders over debt

urged European leaders to fulfil their pledge last June to break the link between bank and sovereign debt.

After talks last evening in Granada on the debt emergency and Ireland's EU presidency, Mr Rajoy rallied behind Mr Kenny in his demand on the EU powers to fulfil that commitment.

The fragile state of Spain's banking system was the prime consideration when EU leaders resolved last year to empower the ESM bailout fund to directly rescue stricken banks. Talks since then have gone around in circles amid resistance from Germany, Finland and the Netherlands to the notion of the ESM fund taking on responsibility for the historic banking losses of the weakest states.

Step forward
Although little substantive progress appears likely on this front before German chancellor Angela Merkel seeks a third term in elections next September, both the Taoiseach and Mr Rajoy said a step forward was urgently needed.

Mr Kenny said this was a credibility test for leaders, adding that outstanding questions over the arrangements for the European Central Bank to directly supervise banks should be settled in June. He also said the "modalities" for the ESM to directly recapitalise banks should be available and agreed in that timeframe.

"I think it's also important to say, as the prime minister has pointed out, that it's fundamental that decisions that are taken by the European Council be seen to be followed through so that the citizens of the EU can see that their leaders are serious about following through on decisions in the union's interests."

The talks took place against at the backdrop of mounting disquiet in Spain at record unemployment.