national

Taoiseach to plead Irish debt case at EU meeting

Taoiseach Enda Kenny will join fellow EU leaders at a summit in Brussels today, where he is expected to argue that decisions agreed at their last meeting in June must be implemented in full.

That deal stipulated that "the vicious circle between banks and sovereigns" had to be broken, and that Ireland's debt should be re-examined to improve its "sustainability".

However, subsequent statements from powerful countries such as Germany have raised questions over whether or not an Irish banking debt deal could be delayed, if not significantly reduced.

At the June summit leaders agreed that the European Central Bank would lead an EU-wide system of banking supervision.

Once operational, it would enable the European Stability Mechanism, the permanent bailout fund, to directly recapitalise banks in weak countries.

A specific reference was made to Ireland, which raised the possibility that the ESM could acquire shareholdings in Ireland's surviving banks and significantly reduce the country's debt burden.

However, finance ministers from Germany, the Netherlands and Finland later argued that the ESM should only be used for "future" bank recapitalisations.

That would be of little benefit to Ireland and its legacy banking debt.

The three ministers further contended that such re-caps should only happen when the "effectiveness" of EU banking supervision had been determined, a condition which could significantly delay any Irish deal.

Mr Kenny will argue forcefully today that EU leaders must be seen to implement decisions which they agree.

Otherwise this will only add to market uncertainty and increase problems for the eurozone, he is expected to say.