ECB chief says Anglo Irish is Government's responsibility
But the European Commission will decide if the toxic bank can go commercial this month
Published 03/09/2010 | 05:00
ANGLO Irish Bank is Ireland's responsibility, European Central Bank governor Jean-Claude Trichet said yesterday, as he urged the Government to take decisions on public spending and the banks.
The comments were made at a press conference in Frankfurt yesterday after the ECB decided to keep interest rates unchanged at 1pc and extend the emergency lending measures for European banks until next year.
Questions about Anglo Irish, and the effects of the bailout on the economy, came amid mounting unease about our ability to honour the national debt as well as the debts taken on from the banking sector.
The markets are still waiting for Finance Minister Brian Lenihan to explain what terms he will attach to the next bank guarantee scheme, while nobody knows what the European Commission will decide this month when it rules on the fate of Anglo's plans to morph into a business bank.
"The Irish banking sector is in trouble," said Marie Diron, an economist at Ernst & Young. "I think that he (Trichet) is trying to urge a rapid decision. Clearly, the cost of Anglo is going to be very high and that is leading to a lot of volatility."
Mr Trichet declined to comment on Irish bond spreads or the particular situation of individual Irish banks, including Anglo Irish Bank.
"It is the responsibility of the Irish government and the Irish authorities to deal with their banks. I have confidence that they will manage these difficulties, as they have done in the past," he said.
"If I'm not misled, (Anglo Irish) is a bank that it is owned by the Government, thus it is the responsibility of the Government to take the appropriate decisions," he added.
Turning to the Government's fiscal policies, the ECB governor said he "would encourage Ireland to continue to take the appropriate decisions that it took with front-loading decisions in all domains, including the fiscal domain".
The comments came as the ECB voted to extend emergency lending measures for banks into 2011, as the risk of a renewed US recession puts the euro-area's rebound in jeopardy.
The vote followed disagreements between the European central bankers, including Ireland's Patrick Honohan, who attended the meeting.
The ECB will keep offering banks unlimited one-week and one-month loans until at least January 18. The ECB will also offer banks three-month loans in October, November and December, at interest rates linked to the ECB's average benchmark rate over the maturity of the loan.
The news will be a relief for Irish banks which depend heavily on the ECB for survival. Policy makers had previously committed to lend banks unlimited cash at the benchmark rate until the middle of next month.
"We have to remain cautious and prudent -- we don't declare victory," Trichet said yesterday.
"Monetary policy will do all that is needed to maintain price stability in the euro area over the medium term."
The ECB raised its 2010 economic growth forecast to about 1.6pc from 1pc previously and also lifted the 2011 projection to 1.4pc from about 1.2pc.
"Recent economic data for the euro area have been stronger than expected," Mr Trichet said on the same day that new figures showed European exports surged the most on record and corporate spending rebounded from a two-year slump in the second quarter, fuelling the region's fastest economic expansion in four years.
Exports from the 16-nation euro region jumped 4.4pc from the first quarter, the biggest gain since data were first compiled in 1995, while corporate spending rose 1.8pc, ending eight quarters of contraction, the European Union's statistics office in Luxembourg said.
Gross-domestic-product growth accelerated to 1pc, faster than growth in the US over the same period. (Additional reporting, Bloomberg)