Hopes for long-term EU funding deal fading
Published 01/04/2011 | 05:00
THE Government's attempts to convince the European Central Bank to provide Ireland's banks with a long-term funding deal appeared to be in tatters yesterday, after Central Bank governor Patrick Honohan said there was nothing "imminent" on the cards.
However, the Frankfurt-based bank did last night loosen its rules on the kind of collateral it will accept from Irish banks in exchange for cash.
For several days the Irish Government and the ECB have been in contact over the issue of a long-term funding deal.
But the ECB's governing council is reported to be split over the issue, with resistance to such an arrangement emerging from the Dutch government.
Ireland's banks are currently getting loans from the ECB on a weekly or three-monthly basis and the lenders and the Government are looking for something more permanent and long-term.
Speculation was feverish last week that a deal was on the cards, but a statement from the ECB and EU yesterday made no mention of changing the current arrangements.
This means Ireland's banks will continue to be funded on what is effectively a drip-feed basis.
Reaction to the ECB stance was negative last night with Davy Stockbrokers saying that a new ECB deal was "essential" to rescuing the banks once and for all.
But speaking at a press conference yesterday Prof Honohan gave no indication a deal was in the offing.
"We see lots of ideas and speculation about such things, it's a very unusual situation, it's natural that people should be coming up with all sorts of ideas on how to resolve it, I don't see any particular prospect of something imminently on the cards," he said.
The ECB and the Irish Central Bank are both funding the Irish banks at present, but Mr Honohan said he was "reasonably relaxed'' about the situation.
Yesterday, Dutch central bank governor Nout Wellink indicated he wanted the Irish Government and perhaps other eurozone governments to do more to solve the problem, not the ECB.
The Irish banking sector "has become a very big black hole", Mr Wellink told Dutch public broadcaster NOS.