Irish default is against 'ECB wishes' - Ahearne
Ireland cannot renege on payments to senior bank bondholders as such a move would be against "the wishes of the ECB", the government's chief economic advisor told a meeting last night.
Alan Ahearne, speaking in NUI Galway, said "large" losses had been imposed on junior bondholders, with €7bn imposed on this group to date, with "more to come".
But he said Ireland could not unilaterally renege on senior bank bonds as this would be against the wishes of the ECB. Mr Ahearne advises the Minister for Finance Brian Lenihan on economic policy and is a former IMF economist based in Washington.
In a bullish assessment of the economy, Mr Ahearne told the audience Ireland was in recovery after a "steep drop in activity".
"Wages have adjusted, productivity has improved and the cost of business has fallen,'' he told the audience. He said the banks were being downsized to make them "proportionate" to the size of the economy.
The banks would be recapitalised to "best international practice".
"The credit review office is helping small businesses, sole traders and farmers to get access to credit," he said.
"The economy and fiscal positions have stabilised, but significant headwinds remain.
"The IMF/EU plan will return public finances to a sustainable level. The plan outlines reforms to support growth and employment,'' he added.