Ireland says unlikely to tap ECB bond-buying scheme

WESTPORT, Ireland Tue Sep 11, 2012 2:26pm BST

Ireland's Finance Minister Michael Noonan waits for the start of an eurozone finance ministers meeting at the EU Council in Brussels July 9, 2012. REUTERS/Francois Lenoir

Ireland's Finance Minister Michael Noonan waits for the start of an eurozone finance ministers meeting at the EU Council in Brussels July 9, 2012.

Credit: Reuters/Francois Lenoir

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WESTPORT, Ireland (Reuters) - Ireland does not expect to tap the European Central Bank's (ECB) new bond-buying programme before it emerges from its EU/IMF bailout at the end of next year, and after that only in case of emergency, its finance minister said on Tuesday.

Ireland is a possible early recipient of the ECB's Outright Monetary Transaction programme as it is the only euro zone country under International Monetary Fund supervision that has some access to bond markets, two conditions of the programme.

But Finance Minister Michael Noonan said Ireland does not expect to need the help if its European partners deliver on a separate deal to cut Ireland's legacy bank debt, which would by itself clear the way for a full return to long-term bond markets.

"Our assumption is that Ireland could access it the same as anyone else if needed, but we're not planning to access it," Michael Noonan told Reuters in an interview.

"We think we are doing very well and if we got a deal on the debt we'd be back in the markets anyway without that assistance," he said. It might later be needed in case of some international crisis, he said.

Euro zone leaders agreed at their summit in June to look at improving Ireland's bank rescue, a commitment that has pushed Irish bond yields down sharply and allowed Dublin to raise long-term debt for the first time since it secured the EU/IMF bailout almost two years ago.

Most of the country's funding will come from its EU/IMF bailout until it expires at the end of next year. On Tuesday Dublin announced its latest auction of three-month treasury bills.

Ireland wants the terms tied to 31 billion euros (24.7 billion pounds) of IOUs pumped into two failed banks eased and Europe's rescue funds to take over its stakes in other lenders.

While there was agreement in principle among euro zone leaders to provide relief to Ireland, the scale of the concessions had not yet been discussed, Noonan said.

Asked about any potential stumbling blocks to a deal, Noonan mentioned parliamentary approval of a possible deal in the Netherlands and Finland, but said he hoped any potential problems could be avoided.

The International Monetary Fund on Monday said the IOUs Ireland wants to refinance should be replaced by long-term government securities rather than European rescue funds, saying that a bond would avoid adding to debts that markets may consider senior.

Noonan said the government has not made a decision on which it would prefer. "They are expressing a view within the Troika, the (European) Central Bank would have other views."

The Irish government has earlier lobbied the European Central Bank to replace short-term funding for Irish banks with a medium-term programme, but Noonan said this was "not as pressing an issue now."

Noonan said the reason that Ireland's 2013 growth forecast of 2.2 percent was much higher than the 1.4 percent forecast by the IMF and many Irish economists was due to the fact that the government had not upgraded its forecast since April.

But he said continued progress towards resolving the euro zone's debt crisis could cause economists to upgrade their forecasts.

"If (ECB President Mario) Draghi's intervention works, it will keep Europe out of recession .. and we can start to be more optimistic about growth rates," he said.

Noonan said the government was prepared to move towards phasing out the expensive state guarantee on bank deposits, but was waiting for Ireland's banks to make proposals.

(Reporting by Conor Humphries; Editing by John Stonestreet, Ron Askew)

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