BoI, AIB shares sale cash will be used to cut national debt
MONEY from the sale of the state's shares in Bank of Ireland and AIB will be used to reduce the national debt, Finance Minister Michael Noonan has said.
The minister revealed last week that he could look to sell part of the state's stake in bailed-out AIB before the next general election in 2016. A sale of the state's 14pc holding in Bank of Ireland was just a matter of price, he said.
Ahead of a meeting of eurozone finance ministers yesterday in Brussels, Mr Noonan said the cash raised would be used to slash the national debt.
"We have a massive shareholding in Irish banks, particularly in AIB, and the Government has already decided that when we sell them, in due course, and when the market is right, we'll use the yield to reduce the debt,'' Mr Noonan said.
Last week in Davos, Mr Noonan indicated that establishing a valuation for the State's AIB shares would help to work out the true position of the national finances – in particular "net debt," the national debt less the value of investments.
Government debt is expected to fall to 120pc of the value of the economy this year and drop further to 118pc in 2015.
The minister said that cash balances would be tapered down over the coming years so the debt was not as high. Borrowing will decline as the State "runs down" borrowings that are currently held to cover the state's running costs into 2015.
Meanwhile, Mr Noonan also said that Ireland's decision to exit the bailout without an overdraft has helped Portugal as it weighs up whether to apply for a credit line.
The southern European economy's €78bn bailout draws to an end in May.
Mr Noonan said Portugal's borrowing costs had fallen thanks to Ireland's upgrade by Moody's.
"Their money is costing less now as well to serve their borrowing as a result of our upgrade last week. But it will be a decision for the Portuguese government and we'll give them every support because they have been quite helpful to us in the past,'' Mr Noonan said.
Yields on Portugal's 10-year government bonds dropped below 5pc last week for the first time since August 2010.
Portugal's Economy Minister Antonio Pires de Lima said last week that the country could freely choose whether or not it would need to tap a precautionary credit line.
But French Finance Minister Pierre Moscovici has said that while the country had made tremendous efforts, there may be a need for an overdraft.
Mr Noonan, however, warned the Portuguese government not to be pressured.
Asked what advice he would give it, he said: "Take everything into account and make a decision. I don't think they should be influenced or pushed around by anybody."
Eurogroup chair and Dutch Finance Minister Jeroen Dijsselbloem said a decision would be made in the coming months, but added that Ireland and Portugal could not be compared.