MINISTER FOR Finance Michael Noonan has warned EU authorities that ongoing bank stress tests may reveal an “unsustainable” requirement for new capital.
At his first meetings in Brussels since taking office last week, the Minister’s argument was curtly rejected by European economics commissioner Olli Rehn.
Mr Noonan also said the Government was not for turning on the country’s corporate taxation rate, but French finance minister Christine Lagarde called for a “gesture” in return for lower bailout costs.
“Without that we won’t budge on the interest rate. I hope some progress will be made,” she said last night.
Mr Noonan said he would be surprised if the stress test showed that the banks’ immediate need for fresh capital was limited to the €10 billion foreseen in the EU-IMF bailout deal.
Although the EU-IMF programme includes a further contingency fund of €25 billion, Mr Noonan said the weight of bank debt was a matter of great concern.
“We are not actively pursuing burden sharing but we are explaining to our European colleagues that there’s a certain point where a combination of the sovereign debt is manageable and [with] the bank debt put on top of it we reach a point where the sustainability of the situation becomes doubtful,” he said.
“Now we don’t want to arrive at that point but to explain it fully to our colleagues we have to talk in the terms we are talking.”
Mr Rehn said “no I don’t” when asked if he shared the view that the bank rescue was in danger of becoming unsustainable.
“We have a clear plan on how to manage the situation but of course it is important that the stress tests are conducted with all clarity and rigour,” Mr Rehn said.
“That will show the real state of the Irish banking sector.”
Answering the same question, Eurogroup chief Jean-Claude Juncker simply said he had a meeting yesterday with the Minister.
The Minister believes the euro zone bailout fund could be deployed to help address the banks but said that possibility was not discussed yesterday.