GERMANY HAS signalled it is open to a reworking of the €30 billion Anglo Irish Bank promissory note to improve the sustainability of the State’s EU-IMF programme.

Ahead of today’s visit to Dublin by German finance minister Wolfgang Schäuble, German officials said retooling the emergency loans to the defunct bank was more politically palatable than transferring Irish legacy bank debt to the European Stability Mechanism (ESM) bailout fund.

Irish officials indicated yesterday that Minister for Finance Michael Noonan would concentrate in today’s talks on the promissory note – issued to pay depositors and creditors of Anglo Irish Bank and, later, Irish Nationwide – and would return to the legacy debt issue when there was more promise of political progress.

Mr Schäuble will hold talks with Mr Noonan and Minister for Public Expenditure Brendan Howlin ahead of a joint press conference. Both sides played down expectations of substantial progress today, ahead of Thursday’s talks in Berlin between Taoiseach Enda Kenny and German chancellor Angela Merkel.

“On the promissory notes it’s difficult to say anything in public as, officially speaking, this is European Central Bank territory,” said a German political source.

“A promissory note deal wouldn’t change the actual amount of debt,” said another official, “but would turn it into a 40-year mortgage.”

The promissory note obligations, an IOU issued to stabilise Anglo Irish Bank, have been the subject of ongoing technical discussions with the ECB.

The Government argues that cutting the interest rate, delaying repayments or extending the repayment term would reduce the final cost of the loan in the long term. In the short term, this would have a positive effect on the State’s financial position and boost market sentiment ahead of a planned return to financial markets next year.

Mr Noonan has said that a positive signal or statement of intent from the ECB, ahead of a final agreement next year, would help him frame December’s budget.

Berlin’s support for retooling the Anglo debt is in contrast to its rejection of a buy-up of Irish bank debt by the ESM bailout fund.

A week after Dr Merkel ruled out such a deal, German political sources reiterated yesterday that such a step “won’t fly” in Germany, the Netherlands or Finland.

To date, ECB president Mario Draghi has been cautious about his bank’s options in ongoing promissory note talks. However, he gave his public backing yesterday for a proposal by Mr Schäuble to give the European currency commissioner extra powers to intervene in national budgets that breach EU fiscal rules.

Mr Schäuble’s idea has been given a cool reception in many EU capitals as an unacceptable intervention in national budgetary law.

“Many governments have not understood that they have long since lost their sovereignty because they have piled up too much debt and are dependent on the benevolence of financial markets,” Mr Draghi told Der Spiegel magazine.

“It sounds like a paradox but only when the euro countries are prepared to share [budgetary] sovereignty at European level will they gain sovereignty.”

Mr Schäuble has ruled out a Greek debt writedown for euro zone creditors. According to weekend reports, officials from the EU-IMF troika will recommend a “haircut” on loans, worth about €127 billion. With €34 billion, Germany is the largest EU creditor.

Earlier this year Greece’s private creditors accepted a 50 per cent writedown on debts, worth about €100 billion.