Together for now

21 June 2011 By Neil Unmack Follow @unmack1

The euro zone has dropped its original plan to make future bailout loans seniorranking to private debt. That should help peripheral countries, particularly Ireland, return to market in future. It may help ease today’s crisis, even if taxpayers pay the price in future.

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Euro zone finance ministers agreed on June 20 that future bailout loans for Greece, Portugal and Ireland under the European Stability Mechanism (ESM) will not have preferred creditor status. The euro zone initially agreed in March that the ESM bailout fund, due to come into force in mid2013, would have preferred creditor status, senior to private creditors, and junior only to the International Monetary Fund.

"It (the ESM) will not have preferred creditor status as regards countries that are already in a support programme ... It will make it easier for them to come back to the market," the chairman of euro zone finance ministers, JeanClaude Juncker, told a news conference.

The euro zone's existing bailout loans, which include bilateral loans to Greece and loans made under the European Financial Stability Facility to Greece and Portugal, rank paripassu with private sector creditors.

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