German Spokesman: Ireland Needs New Bailout Terms to Use ESM

Irish government hopes of using the EU's latest financial firewall to help its indebted banks would require a bailout program with new terms, a German budget spokesman said on Friday ahead of Berlin talks.

Norbert Barthle, spokesman for German Chancellor Angela Merkel's CDU group in the Bundesstag budgetary affairs committee, said the application by Dublin to use the European Stability Mechanism (ESM) would require new bailout conditions.

Since Ireland's current bailout program falls under the ESM's predecessor, the European Financial Stability Facility (EFSF), "it would be difficult to change this program into an ESM program," Barthle told RTE state radio.

"I think it would be necessary to ask for a new program. A new program, a new conditionality," he added.

The comments came as Irish Deputy Prime Minister Eamon Gilmore was to visit Berlin on Friday for talks with his counterpart, German foreign minister Guido Westerwelle, and opposition leaders.

Gilmore was expected to raise issues concerning Ireland's bailout programme, due to conclude at the end of 2013, with a full return by Dublin to the sovereign bond markets.

On Thursday, the IMF mission chief for eurozone member Ireland, Craig Beaumont, said it was important that some of the 24 billion euros ($31.1 billion) provided under the bailout to recapitalize Irish banks be transferred to the ESM.

In November 2010, Ireland obtained an EU-IMF bailout package worth 85 billion euros after the collapse of the Irish economy that was left badly exposed to the global financial downturn and the bursting of an inflated property bubble.

Last Friday, Merkel appeared to rule out using the ESM for legacy debt issues in a move that startled Dublin. Two days later, however, she issued a statement with Irish Prime Minister Enda Kenny referring to Ireland as a "special case."

On Thursday meanwhile, Ireland's finance minister said the country stood ready to explore an exit from its bailout program.

Michael Noonan spoke at a Dublin press conference to mark the eighth review of its bailout program by the European Union, the International Monetary Fund and the European Central Bank, the so-called 'troika' of creditors.

The eurozone unlocked the ESM, its 500-billion-euro crisis war chest, earlier this month amid worries over Greece and as Spain agonized over whether to seek a full bailout.