Dáil extends bank guarantee scheme until end of 2013

The Dáil has voted to extend the bank guarantee scheme until the end of next year, even though the State hopes to exit the scheme during 2013.

The Coalition parties and Fianna Fáil supported the measure by 85 to 31 votes as Sinn Féin finance spokesman Pearse Doherty forced a walk-through vote to “remind the Labour Party that this is about the extension of the bank guarantee”.

Minister of State for Finance Brian Hayes said it was the Government’s ambition to “exit the guarantee next year and, hopefully, that will happen”. Early indications were that they could exit the eligible liabilities guarantee scheme “in the first quarter of 2013”, and that would be “another example of weaning the banks off taxpayers’ money”.

Yet while a strategy was being developed to wind down the scheme “in the near future” they needed to address a “prolongation” until December 2013.

He stressed that most account holders were not affected by the scheme as the Central Bank guaranteed deposits of up to €100,000.

Fianna Fáil public expenditure spokesman Seán Fleming said the scheme would be extended only for new deposits made next year, while existing deposits were guaranteed until they matured. He noted that the Department of Finance did not build the scheme into its medium-term fiscal projections.

However Mr Doherty criticised the move, and said it was the third time the Government had sought to extend the scheme. Doing so “proves beyond any doubt that the Government has again failed to release the State from the grip of the guarantee”.

He said at the end of September the total amount guaranteed was €78 billion but the Government wanted to “allow banks to place new liabilities on the State and its taxpayers”. Last year the Government “bailed out” the banks to the tune of €21.4 billion.

The Government was “willing to guarantee the banks to the tune of hundreds of billions of euro” but did not “for one second think to provide a guarantee for citizens in order to shield them from the social and economic crisis created, in the first instance, by the reckless behaviour of the banks”.

United Left Alliance TD Richard Boyd Barrett said Irish citizens were paying €64 billion “for returning the banks to so-called normality”. It would cost the State €9.1 billion in debt interest next year.

Independent TD Shane Ross said there might be some case for a guarantee extension if the Government was prepared to take responsibility for the banks and direct their operations. But “the banks are in an extraordinary situation. They are being guaranteed by the Government, subsidised by the taxpayer and allowed to run themselves as some sort of quasi-independent organisations.”