September 28, 2012 / 3:28 PM / 6 years ago

Ireland eyes November deal on bank debt talks

DUBLIN (Reuters) - Ireland said it still hoped for support for significantly easier terms for its bank bailout by November, and that the economy was growing in line with government forecasts for this year.

Central bank deputy governor Stefan Gerlach said he was optimistic that the euro zone’s bailout fund would help cut the cost of Ireland’s bank rescue, while finance minister Michael Noonan said on Friday his hopes for a broad deal were unchanged.

Ireland, which has been pressing the European Union for a deal for over a year, seemed to meet a major hurdle this week when Finland, Germany and the Netherlands issued a joint statement that appeared to row back on a pledge by EU leaders to use rescue funds to recapitalize problem banks.

Noonan said that by drawing a distinction between future and legacy banking problems, the three countries were referring to failed groups like state-owned Anglo Irish Bank and not the state’s stakes in two viable lenders or so-called pillar banks - Bank of Ireland BKIR.I and Allied Irish Banks ALBK.I

“A lot of people focused on the comments on legacy debts on banks. But that evening the Dutch authorities put out a statement saying that what they meant by legacy was banks that were insolvent,” he told reporters.

“That would mean it would not apply to the pillar banks in Ireland but that it would apply to Anglo. Nobody expected that Anglo was going to be recapitalized by the ESM anyway, so the clarifications are coming out.”

Noonan said he hoped to have a definite indication on the possible bank debt, if not by an original deadline of October, then by November.

Gerlach said he was “pretty confident” Ireland would make a full return to long-term debt markets at current bond yields.

Ireland has taken the first steps back into short and long-term markets over the past three month after yields fell to their lowest levels in over two years following decisions taken at the EU summit in June.

Yields on Ireland’s benchmark 2020 bond stood at 5.19 percent, 20 basis points up on the week but well below the 7.5 percent hit in May.

“It strikes me that a five percent interest rate would be sensible. Four percent would be better, perhaps six is doable in the long run, in the next couple of decades,” Gerlach said.

“I think the government will not have a problem to go back to the markets. I do not think the government will need a second bailout,” he told reporters.

Reporting by Padraic Halpin and Conor Humphries; Editing by Dan Lalor

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