ECB rejects Irish bid on promissory note-sources
ECB could accept the swapped Irish bonds as collateral in its refinancing operations.
Irish central bank governor Patrick Honohan, who represents Ireland on the ECB's board, described Dublin's proposal last week as a "novel" solution to reach a deal which would not take policymakers too far out of their comfort zone.
Honohan said a solution was not yet "done and dusted" but ministers have been far more confident with Finance Minister Michael Noonan repeating last week that a deal was likely, although he cautioned that significant outstanding matters could derail it.
Dublin postponed last year's 3.1 billion euro cash payment by issuing a 13-year bond and had floated the idea of replacing the rest of the payments with loans backed by euro zone bailout cash, but have concentrated their efforts on settling the issue with a long-term bond.
European Economic and Monetary Affairs Commissioner Olli Rehn told Reuters that euro zone governments were looking at ways to help Ireland back to full market access that could include extending the maturity of the bailout loans it received in late 2010 or possibly extending a precautionary credit line to Dublin from the euro zone's ESM rescue fund.
The latter option could open the way for the European Central Bank to buy short-term Irish bonds on the secondary market to help bring down its borrowing costs under the ECB's Outright Monetary Transactions policy.
However, a source familiar with ECB thinking said the Governing Council would rather hold its OMT weapon in reserve as
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