Ireland has threatened senior bondholders of Irish bank debt in the latest government negotiating ploy with the Eurozone’s leaders.The threat, to force some bondholders in Ireland’s banks to take a haircut as part of a restructuring, may be a negotiating tactic to get eurozone leaders to agree to better lending terms for the country, according to Bloomberg.
Ireland has thus far been unwilling to budge on the issue of corporate tax, the key for eurozone leaders like Angela Merkel and Nicolas Sarkozy in any negotiated deal over the country’s lending rate.
But Germany and France are deathly afraid of what the impact of haircuts would be on the broader eurozone and their country’s banks. Germany’s financial sector has €21.3 billion in exposure to Ireland’s banking sector, so a haircut in Ireland could trigger problems for Germany domestically.
Whether or not this negotiating tactic will work is unknown, but it appears the new Irish leadership is willing to use it over the next few weeks.
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