Merkel rebuffs Ireland bid to cut EU bailout cost

Germany will rely on ‘brinksmanship tactics’, say analysts

German Chancellor Angela Merkel rebuffed Ireland’s plea to cut the cost of its European Union bailout, saying “relief isn’t the issue.” Merkel’s response to Enda Kenny, Ireland’s incoming prime minister, at a meeting of conservative officials from the 27-nation EU underscored divisions as leaders near a March 25 deadline for a reinforced plan to aid debt-strapped countries.

Germany will rely on “brinksmanship tactics, which means no agreement until the very last moment,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co in New York, said in an e-mailed note yesterday.

With the Irish economy devastated by three years of recession and the demise of the financial system, Kenny made a fresh demand at the gathering in Helsinki, saying he wanted an extension on rescue loans as he repeated a call for lower interest rates on the aid that was granted in November.

“There’s no use in offering relief” unless “conditions get tougher” for the countries that seek it, Merkel told reporters. “We have to find solutions that fit the bill. There will always be give and take. To make certain things possible, further commitments, further conditionality will be necessary.”

Kenny said “resistance” in “many” EU capitals to ending the protection of senior bank bondholders in Ireland meant relief for Irish taxpayers should instead also include an extension of loan maturities now due to average seven-and-a-half years as part of the ¤85-billion rescue.

“We are in a very challenging programme,” Kenny told reporters. “We want to see adjustments. Our overall requirement is that there be a reduction in the cost of the package.” Kenny, leader of the Fine Gael party, is in talks to form a government after February 25 elections ejected the ruling Fianna Fail party.

Kenny has some allies in his effort to ease bailout terms, including leaders in debt-wracked southern Europe.