BRUSSELS (MNI) – The European Commission on Thursday dampened Irish
hopes that the country might be able to renegotiate the terms of its
EU-IMF rescue package by playing down comparisons between Ireland and
Spain, which EU officials are trying to aid with fewer strings attached.

“It is essential not to make comparisons,” said a spokesman for the
Commission.

“Spain is taking decisive action to address challenges in its
public finances” and has already undertaken crucial structural reforms,
the spokesman said.

Madrid has also “done what should be done first, namely to identify
the fragilities” of the banking sector, “and they will take it from
there to present a restructuring plan,” the spokesman said.

At the time European governments and the IMF got together to bail
out Ireland, the country’s situation “was something more than a crisis
in the banking sector” since the government’s decision to nationalize
troubled banks had “already affected public finances,” the spokesman
noted. So “action was required in a number of areas,” he said.

“In the case of Ireland, the public finances had sharply
deteriorated because of the situation in the banking sector, so any
programme had to address both. A programme could not have been focused
exclusively on the banking sector,” the spokesman added.

The Eurozone’s temporary bailout fund, the European Financial
Stability Facility, also had less flexibility at the time the Irish
bailout was agreed, he observed.

Although considered a model student, Ireland, like other bailed out
European countries Portugal and Greece, has to undergo quarterly
assessments by EU and IMF inspectors before its aid checks are signed.

Wary of submitting itself to such scrutiny, and to the kind of
comprehensive list of targets and reforms that Ireland, Portugal and
Greece had to accept, Spain has so far resisted asking its Eurozone
partners for financial help to deal with the crippling weaknesses of its
banking sector.

EU officials, however, are increasingly concerned that Madrid
cannot afford to recapitalize its sick banks without outside help and
are trying to find a way to aid Spanish banks with only limited
conditionality.

By arguing that Spain is doing everything right but just needs more
help for its banks, EU officials are seeking to pave the way for
acceptance of such a scheme.

Spanish and EU officials are concerned that EU aid for Spain would
increase the country’s public debt burden since Europe’s rescue funds
can only aid governments.

–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com

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