Germany is moving closer to giving a public signal of support for Ireland’s debt relief campaign to improve prospects of a smooth return to private debt markets next year.
Although Berlin is opposed to direct bank rescues by the European Stability Mechanism (ESM) fund before 2014, support for a special agreement for Ireland is quietly gaining traction.
This follows a deal yesterday for an ECB-based banking supervisor, a German precondition for direct bank recapitalisations.
Dublin wants the fund to invest in surviving banks such as AIB and Bank of Ireland to ease the State’s debt burden.
However, Berlin has to date opposed any deal that might unsettle investors or could be criticised as a second Irish bailout by German MPs.
A final deal is some way off and talks on this front are separate from the push to recast the Anglo Irish Bank promissory note scheme.
Having agreed that Ireland is a “special case”, Germany is open to a more explicit show of support for Dublin to ease borrowing costs on its return to market.
A bailout success story is seen to be in Germany’s interest.
Taoiseach Enda Kenny welcomed the ECB deal.
“I hope that this can be endorsed by the heads of government,” he said, “and we can move on to reaching the target date of March for the conditions that will actually apply to it.”
