Europe

Ireland secures new debt deal to reduce burden on taxpayers

EU and Irish flag
Image caption Ireland has secured a new debt deal which should reduce the burden on Irish taxpayers.

Ireland has secured a deal in principle to alleviate the country's debt burden, Taoiseach Enda Kenny has said.

The breakthrough came in the early hours of the morning during a summit of eurozone leaders in Brussels.

Mr Kenny said: "What was deemed to be unachievable has now become a reality."

This new debt deal will allow Ireland to re-engineer its overall debt level, which would reduce the burden on Irish taxpayers.

Debt Burden

According to a statement issued at 4am, eurozone leaders pledged to "examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme."

Following intensive negotiations, first at official level and then at heads of government level, it was agreed that the EU's permanent bailout mechanism could be used to directly recapitalise eurozone banks.

This had been a key demand of the Spanish and other governments, including Ireland, in the run up to this week's crisis summit.

Speaking as he left the European Council building, Mr Kenny described the new deal as a seismic shift in EU policy, and said it would allow Ireland to re-engineer its overall debt level, which would reduce the burden on Irish taxpayers.

"What was deemed to be unachievable has now become a reality and that principle has been established, decided and agreed upon by the council and heads of government," he said.

Mr Kenny said the new deal means Ireland's overall debt burden, including the bank debt, can be re-engineered in a way which will give Ireland equal treatment to Spain and any other countries that avail of the new system.

" That means that heads of governments decision will now be referred to the eurogroup [of eurozone finance ministers] for an analysis of how best this might be used in Ireland's case to re-engineer the debt burden....which is what we set out to do.

"In the case of countries that are going to be involved here, where funding is made available through the EFSF it will later be transferred to the ESM, and that is also the case in reference to Spain.

"The fundamental principle of the ESM providing funding to break the link between sovereign and bank debt has now been agreed by the heads of government. It allows in Ireland's case the opportunity to re-engineer in a number of ways the debt burden on our taxpayers," he said.

The new deal follows months of trenchant German opposition to the use of the European Stability Mechanism (ESM) to directly recapitalise banks.

The deal reached in principle will now be transferred to eurozone finance ministers to work on the technical detail.

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