Brussels, 18/07/2012 (Agence Europe) - The President of the European Central Bank (ECB), Mario Draghi, says that the question of cost-sharing with holders of senior bonds has been discussed in Brussels and is currently under discussion in terms of a draft directive. On 6 June 2012, Internal Market Commissioner Michel Barnier unveiled draft legislation on the management of bankrupt banks (see EUROPE 10627), which says that if a bank is restructured, senior bond-holders will have to accept losses from 2018 onwards. The legislation has yet to be negotiated by the European Parliament and the EU Finance Ministers.
Draghi said that he expected the talks to have repercussions on the Irish structural adjustment programme. He met Irish Finance Minister Michael Noonan in Frankfurt on Tuesday 17 July 2012. Noonan had travelled to Germany for talks with Draghi, according to reports in the Wall Street Journal on Monday 16 July (see EUROPE 10656).
The Wall Street Journal says that, at the Monday 9 July Eurogroup meeting, Draghi suggested forcing senior debt holders to take losses as part of the restructuring of the Spanish banks in greatest difficulty. The opposite was decided upon for the Irish aid package, however.
After his meeting with the head of the ECB, Noonan admitted that Ireland would not be able to win any progress on the issue directly because it has already reimbursed the bond and shareholders of the struggling banks in question. Noonan hoped, however, that there would be an easing of the terms and conditions for Ireland laid down by the troika (the ECB, European Commission and IMF), which welcomed progress in application of Ireland's structural adjustment programme when issuing their seventh progress report (see EUROPE 10655). Noonan is due to meet Economic and Monetary Affairs Commissioner Olli Rehn later this month, along with IMF representatives. Rehn said at the 9 July Eurogroup meeting that tangible proposals would be issued in September to the eurozone finance ministers to be agreed upon in October in order to improve the viability of Ireland's structural adjustment programme. (EL/transl.fl)