Business Irish

Wednesday 3 September 2014

EU to call emergency talks on bank crisis

> Bailout interest deal stalled
> Portugal reeling as PM quits

Emmet Oliver, Laura Noonan and Donal O Donovan

Published 24/03/2011 | 05:00

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AN EMERGENCY meeting of EU finance ministers is now on the cards to investigate the full extent of our banking crisis.

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It will be called because European leaders are seriously concerned that rescuing the banks will cost more than the €35bn agreed in the bailout deal.

That means that Taoiseach Enda Kenny is unlikely to win any concessions on the bailout interest rate at today's planned meeting of the 27 EU leaders in Brussels.

Instead, Europe has decided our bank problems are so serious there is little point in considering other issues, such as altering our EU/ IMF interest or corporation tax rates.

European leaders are not scheduled to meet again until June. But such is the perceived seriousness of our problems that finance ministers could start examining the results of our bank stress tests as early as next week.

They are likely to do so initially by phone, but a formal meeting will follow soon after.

The EU's focus also shifted to Portugal last night, where the government effectively collapsed after its parliament refused to endorse more austerity measures.

Prime Minister Jose Socrates resigned after opposition parties scuppered his proposals devised to avoid a bailout. Mr Socrates said the defeat made it impossible for him and his government to ensure Portugal's economic future.

The government, however, will retain its full powers until the president officially accepts the prime minister's resignation tomorrow.

The resignation was expected after days of political tension, but could reignite market anxiety about the financial soundness of the wider eurozone.

The setback could thwart efforts by European leaders to persuade nervous investors that all is well in the eurozone and doom Portugal to accepting financial assistance like Greece and Ireland last year.

That drama and EU concerns over our banks come in advance of a critical meetings on the lending institutions here tomorrow.

Summoned

Chief executives at Bank of Ireland, AIB, Irish Life & Permanent and EBS have been summoned to separate meetings at the Central Bank to receive "draft" findings of the latest banking stress tests. While Europe's partners are not willing at this stage to give fresh financial concessions, the shock of those stress test results may alter the picture.

"A format will be found to deal with the problem," a leading European diplomat said.

EU partners will be more receptive when they see the stress test results, the diplomat said.

Mr Kenny had hoped to secure a concession on the punitive 5.8pc interest rate at today's EU summit. But European diplomatic sources said Irish issues had been "parked" after contacts were made between Europe and the Government, both of whom are anxious about the bank tests.

"This is all better dealt with as a package," the European diplomat said.

It means that a meeting is likely to be held shortly after the stress tests are published, to design a whole new set of banking measures for Ireland.

Sources said the meeting would effectively be devoted to considering the several financial challenges facing the country.

There was a dramatic sell-off of Irish and Portuguese government bonds yesterday.

Irish Independent

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