TOO much “domestic noise” about the need for senior bondholders to accept their share of the financial crisis burden contributed significantly to the erosion of deposits from the Irish banking system, Minister for Finance Brian Lenihan has claimed.
Speaking on the EU-IMF deal and releasing a number of the documents involved in the agreement, Mr Lenihan told the Dáil that “in recent years there has been much commentary about the need for senior bondholders to accept their share of the burden of this crisis. I have to say that there has been far too much discussion.
“When those who deplore the gradual erosion of the deposit base of the Irish banking system come to reflect on it, they will see the substantial contribution that was made to that by the amount of domestic noise generated in this area.”
Mr Lenihan said no programme would have been possible if Ireland intended to dishonour its senior debt. “There is simply no way that this country, whose banks are so dependent on international investors, can unilaterally renege on senior bondholders against the wishes of the European Central Bank.”
The Minister stressed that “without this programme our ability to fund the payments to social welfare recipients, the salaries of our nurses, our doctors, our teachers, our gardaí would have been extraordinarily limited and highly uncertain”.
He said €50 billion of the €67.5 billion that Ireland would receive from its EU partners and the IMF “will go to fund those vital public services over the next three years. In those circumstances, the only responsible course of action for any government would be to accept the EU-IMF financial assistance fund.”
He stressed that “we enter this programme not as a delinquent state that has lost fiscal control. We enter it as a country funded until the middle of next year”.
Asked by Pat Rabbitte (Labour, Dublin South West) what freedom the next government would have to change the agreement given the very specific parameters set, Mr Lenihan said it would have as much freedom as he had since his appointment as Minister in May 2008.
“It is important to remember that when you are borrowing, and borrowing at unsustainable levels, you have to take certain decisions in the public interest . . . decisions which might not be popular in the political sense but are essential for the long-term interests of the country.
“I do not believe the practical options open to this country in the next four years would have been any different were funding to be available to us in the markets than were we to adopt the programme.’’
Mr Lenihan said “rigorous monitoring’’ would help focus the public debate in Ireland on where it should be “and not on nonsensical solutions to our economic problems”.
Fine Gael finance spokesman Michael Noonan said “we are in the third year since the Minister introduced the infamous guarantee in the last days of September 2008. No file has yet gone to the director of public prosecutions. I forget how many times I have said that in this House.’’
Mr Noonan said of the 65 directors who were in the covered institutions at the time of the crisis, 32 were still in position.
Labour finance spokeswoman Joan Burton rejected claims that remarks by German chancellor Angela Merkel about bondholders bearing responsibility in future caused the current wave of unrest and the attack on countries perceived to be weak.
“Given the way in which the Irish crisis was approached and the many assertions by the Minister and the Government that Ireland was turning a corner” meant that “Ireland has relatively little credibility. Mrs Merkel’s comments, therefore, were perfectly justifiable, in my view.”
Sinn Féin finance spokesman Arthur Morgan said Ireland did not have the economic base to repay the loan. Hard-nosed negotiation was needed. But the “political leadership involved” amounted to “sending in a bunch of kittens to be mauled by a German shepherd”.
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