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France’s Francois Hollande backs retroactive deal on €64bn in Irish bank debt

October 23, 2012 Irish Independent
Taoiseach Enda Kenny has secured the support of the two most powerful leaders in Europe for giving Ireland a bank debt deal.

French President Francois Hollande has joined German Chancellor Angela Merkel in viewing Ireland as a 'special case'.

The country's borrowing rate was little changed yesterday, reflecting the assumption that the market has already priced in some form of a deal on Ireland's bank debt.

Following the clarification by Chancellor Merkel that there were "unique circumstances" behind Ireland's bank and state debt crisis and said measures to ease the debt burden would be examined, Mr Kenny met with the French president.

Mr Hollande gave strong support for Ireland's campaign, stating: "Ireland is a specific case and deserves to be seen as such."

Mr Hollande was speaking after a 50-minute bilateral meeting with the Taoiseach at the Elysee Palace in Paris.

Mr Hollande offered unequivocal support for the Government's position and said legacy debt should be included in the deal.

"What has been agreed upon in June will be implemented. The (Irish) banks have been recapitalised already and this was done through the budget and it increased the debt of Ireland, so this will have to be taken into account," he said.

Mr Kenny said he was "very happy" the French president fully understands the Irish position.

"Our banks have been recapitalised and the situation is that Ireland was the first and only country which had a European position imposed upon it in the sense that there was no opportunity for the Government if it so wished to do it their way by burning bondholders," he said.

The meeting took place after a turbulent weekend for the Government after comments by Ms Merkel at the EU summit in Brussels sparked an intense round of diplomatic phone-calls between the two administrations, leading to the communique on Sunday evening which appeared to state that on the matter of debt relief, Ireland is "a special case".

It was the Taoiseach's first official meeting with Mr Hollande, who was elected in May, and it was also the first formal meeting at the Elysee Palace between Irish and French heads of government since autumn 2008.

The yield on the benchmark nine-year bond was little changed at 4.74pc last night. The difference, or spread, between Irish bonds and their German equivalent fell marginally to 3.12pc.


The country's cost of borrowing for five years, however, fell 17 basis points to 3.4pc, while the yield on two-year debt slid 5bps to 1.8pc.

Investors apparently wanted more clarity on what Ms Merkel meant when she referred to Ireland as a "special case".

NCB Stockbrokers economist Philip O'Sullivan said: "While the use of terms such as 'unique' and 'special case' will presumably soothe some of the concerns that followed Merkel's recapitalisation remarks, the lack of any explicit commitments on the bank debt issue means that these concerns are unlikely to entirely go away."

Davy Stockbroker economist Conall MacCoille said the Government "may breathe a sigh of relief", but cautioned that "the timing and shape of any deal that Ireland may get on the legacy banking debt remains as elusive as ever".

Finance Minister Michael Noonan insisted the Government never shared in the "degree of panic" that swept the country following remarks by the German chancellor.

"It was also pretty clear to me that Mrs Merkel was talking about Spain," he said.