On Friday, during her post EU leaders’ summit press briefing, German Chancellor Angela Merkel emphatically ruled out the prospect of back-dating recapitalisation of the banks through the European Stability Mechanism (ESM).
She may have been answering questions in relation to Spain, however, her comments set alarm bells ringing in the minds of Taoiseach Enda Kenny and Tanaiste Eamon Gilmore who arrived home in the belief that the eurozone’s ‘good boys’ could still benefit from a June 29 deal sold to us as a ‘breakthrough’ one.
In principle the deal agreed to separate Ireland’s bank and national debt, a cash injection in return for shares in Irish banks and establishment of a eurozone system of bank supervision.
Chancellor Merkel’s comments meant the phone lines between Dublin, Brussels and Berlin were red hot over the weekend and the subsequent negative media coverage – described by Communications Minister Pat Rabbittee as an ‘orgy of negativity’ - also significantly influenced events.
By Saturday afternoon, Merkel and the German Government had softened their stance somewhat, announcing they were concerned about Ireland’s economic problems and they were determined to work with Ireland in helping resolve matters.
On Sunday, Germany went a step further and formally recognised Ireland’s special circumstances.
Considering Chancellor Merkel’s coalition government is under pressure and facing into elections, it suggests that the Taoiseach did very well in securing special recognition.
Taoiseach Kenny and Chancellor Merkel issued a joint communique reaffirming the June 29 ‘deal’ – potentially including refunding the taxpayer for some of the €64 billion injected into the banks from EU bailout funds - and they also discussed Ireland’s plans for a return to the markets.
Some argue the goodwill in Berlin for Ireland should be a help in complex negotiations ahead, while others say Ms Merkel’s intervention on Friday and subsequent communique merely compounds confusion on the issue.
So does this victory for Mr Kenny suggest he has got a direct line to Ms Merkel or was it the media kickback that prompted a shift in the German Chancellor’s stance? And if the Taoiseach has such a good working relationship with Ms Merkel why then wasn’t she clearer in her comments last Friday?
The next six to nine months and Ireland’s forthcoming EU Presidency will shed far more light on this cordial relationship, but for now Ms Merkel says Ireland is a ‘special case’ and she reiterated the June 29 promise of breaking the link between bank and state debt, along with cutting a deal.
The Taoiseach doesn’t have a deal yet, nor a timeframe, however, he will be very much aware that the Government has until March 31 next year when it will fork out €31 billion worth of Anglo Irish Bank IOUs.
His negotiation skills came in for scathing criticism over the weekend and with much harder negotiation required to ensure there is no reversal of the June 29 deal, Mr Kenny will have to dig deep and show a steely edge as he attempts to deliver on promises made to voters at the last general election.
Mr Kenny met with French President Francois Hollande on Monday to continue his lobbying for a debt deal.
And you can be sure that when he appears in the Dail later today (Tuesday, October 23) that Fianna Fail leader Micheal Martin will be ready to pounce from the opposition benches attempting to capitalise on the weekend turmoil.
Having gained a political life-line, the Government and Mr Kenny, with their massive Dail majority, need to provide far more decisive leadership and not just be the EU ‘good boys’.