In Depth

Spain’s soft bailout: ‘Us too,’ say Ireland and Greece

The renegotiation can-of-worms has been opened as Ireland demands same pain-free bailout terms as Spain

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HOURS AFTER Spain announced it will request a loan - on relatively painless terms - of up to €100bn to shore up its ailing banking sector, fellow eurozone struggler Ireland has let it be known it intends to renegotiate the harsh measures attached to its own bailout, which it accepted in 2010.

While the terms of any Spanish bailout are so far unclear, the country’s finance minister, Luis de Guindos, says that any measures imposed are expected to be limited to the financial sector, sparing the country from further harsh austerity measures.

Such an outcome would be in stark contrast to the experiences of Ireland, Portugal and Greece, which have accepted bailouts from the European Union and International Monetary Fund in return for imposing draconian cuts on government spending.

If, as seems likely given the country’s size and therefore bargaining power, preferential terms are extended to the Spanish, the EU might find it has opened a Pandora’s box, beginning in Dublin.

A “European government source” told AFP that Ireland had highlighted “the need to ensure parity of the deal with Spain retroactively on its bailout".

AFP says a second European government source backs up this story. Apparently, Ireland intends to raise the issue during the next meeting of eurozone finance ministers on 21 June.

Ireland was known to be keen on renegotiating its bailout well before Spain agreed to request a loan, as a report in the Irish Examiner from June 5 suggests.

Ireland’s Tanaiste (deputy head of government) Eamon Gilmore said that his peoples’ decision in a referendum to accept the new EU fiscal treaty, which imposes strict limits on governments’ budget deficits, had “certainly strengthened the hand of the Government, giving us added authority in talking to the European institutions and the other European member states”.

He added: “We are going to continue doing that to secure a deal in relation to our bank debt which is satisfactory for the point of the Irish taxpayers.

That 21 June eurozone meeting could be interesting, because the Irish finance minister is unlikely to be the only one calling for a renegotiation of harsh bailout terms.

By then, Greek elections, set for 17 June, might well have installed the leftist, anti-austerity Syriza as the largest party in the Athens parliament.

Financial blog Zero Hedge points out that the Spanish bailout makes a victory for Syriza, which has been telling Greek voters it can renegotiate its bailout despite Germany’s protestations, far more likely.

“With Ireland on the renegotiation train, next comes Greece. Only with Greece the wheels for a bailout overhaul are already in motion and are called a ‘vote of Syriza on June 17’. And remember how everyone was threatening the Greeks with the 10th circle of hell if they dare to renegotiate the memorandum?

“Well, Spain just showed that a condition-free bailout is an option. Which means Syriza will get all the votes it needs and then some with promises of a consequence-free bailout renegotiation.”

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