Banks can't be allowed to fail: Lenihan
Finance Minister Brian Lenihan said the Government can’t let banks fail as it may damage investor perception of the country’s creditworthiness.
“We’re determined that Ireland should be a place that people are safe to invest in,” Lenihan said in an interview with Bloomberg Television from Dublin today.
“We’ve always paid our way and we intend to continue doing that.”
Irish banks need €32bn in new capital after “appalling” lending decisions left the country’s financial system on the brink of collapse, Lenihan said yesterday.
Fine Gael wants the Government to hand the nationalised Anglo Irish Bank to creditors.
Lenihan rejected this, saying it would cost more to wind down the bank.
“If the bank is systemically important, the ongoing damage on the economy is enormous,” said Lenihan. “We don’t think default sets a very good headline for anyone.”
The premium investors charge to hold Irish 10-year debt over the German equivalent was at 138 basis points today compared with 284 basis points in March 2009, a 16-year high.
The Government has raised taxes and cut public-workers’ pay to narrow a budget deficit that widened to 11.7pc of gross domestic product last year.
Lenihan said the country won’t have to borrow to fund any additional capital injections into Allied Irish Banks or Bank of Ireland, if such aid is needed.
AIB needs €7.4bn in capital after property loans soured and Bank of Ireland needs €2.7bn, the financial regulator said.