| COPENHAGEN, March 31
COPENHAGEN, March 31 The European Central Bank
cut Ireland no slack on its push to reschedule payments on 27
billion euros worth of high-interest IOUs, leaving Dublin to
lobby other lenders that mounted a rescue to ease the pain of
its bailout cost.
Debt-laden Ireland is seeking to reschedule the repayment of
the IOUs, which it issued to prop up two banks, to lighten the
burden of interest payments and boost its chances of returning
to bond markets next year.
Ireland struck a deal on Thursday to avoid immediate payment
of 3.1 billion euros due, settling the bill by issuing a 13-year
bond. Dublin now wants a similar deal on refinancing the
remaining 27 billion euros of the IOUs - or promissory notes.
The previous Irish government issued the notes to Anglo
Irish Bank and home lender Irish Nationwide, now merged and
known as the Irish Bank Resolution Corporation (IBRC), to help
them access emergency funds from the Irish central bank - part
of the ECB's Eurosystem - to repay private bondholders.
IBRC is kept afloat with emergency loans - known as
Emergency Liquidity Assistance (ELA) - from the Irish central
bank. This arrangement requires the approval of the ECB.
The ECB signalled it could accept no slippage in the
repayment schedule, saying in a statement issued on the eve of a
weekend meeting of European finance officials that: "It is of
utmost importance that the commitments of the Irish state are
met in line with standing contracts and agreements.
"The Eurosystem (of euro zone central banks) has provided
unprecedented support for the Irish banking sector," the ECB
added. "The objective should be to reduce over time the reliance
of Irish banks on central bank funding and in particular on the
Emergency Liquidity Assistance."
One possibility for Ireland could be to try to convince
other euro zone countries members to allow it to tap the
European Financial Stability Facility (EFSF), the euro zone's
bailout fund, to reengineer the debt payments.
Irish Finance Minister Michael Noonan alluded to this
possibility at the meeting of in Copenhagen but added that it
would be of little use "unless we got the commitment to ongoing
medium-term low-cost funding from the ECB".
The problem for Ireland is the ECB believes that this
assistance, or ELA, should only be provided on a temporary
basis. Doing so on a longer-term basis could be seen by the ECB
as monetary financing - or using central bank money to fund
governments, which is forbidden by European Union law.
When asked if the ECB could be flexible about rescheduling
the promissory note payments, Bundesbank chief Jens Weidmann - a
hardline ECB policymaker - said on Saturday "the impression
cannot arise that the ban on monetary financing can be
"If this is a normal, reasonable market process, then I have
no problem with it. Otherwise, it looks difficult to me."