Sunday 28 December 2014

Noonan hints at U-turn on selling stakes in banks to EU bailout fund

Colm Kelpie and Thomas Molloy

Published 09/11/2012 | 05:00

Change of tack in drive to ease debts as minister says ESM 'not suited' to running Irish lenders

FINANCE Minister Michael Noonan suggested another U-turn in the Government's campaign to get Europe to ease the State's debt burden, telling the Dail yesterday that the new bailout fund might not be best suited to run Irish banks.

Mr Noonan told the Oireachtas Finance Committee that the European Stability Mechanism (ESM) had no experience of running a bank.

"There's a question -- do you think a fund in Europe which is designed as a rescue fund are really the best people to run an Irish bank?" the minister said.

The Government's efforts to reduce the national debt have so far hinged on a deal on the promissory notes linked to Anglo Irish, and a deal that would allow it to sell stakes in the various state-owned banks to the European Stability Mechanism for more than their book value.

The second element in the deal would scale back the State's potential liabilities and raise money for the Exchequer.

"It seems the Government is starting to step back from its previous policy of trying to persuade eurozone leaders to directly recapitalise the Irish banking system, and so improve long-term Irish debt sustainability," said Owen Callan, an analyst at Danske Bank in Dublin. "Unless the price being offered by the ESM was significantly above current distressed and bottom-of-the-cycle market prices, it would make much more sense for the Government to seek to partner up with a private sector trade buyer, or else simply hold on to the banks until the market has recovered back towards book value."

The State's €30bn investments in the country's banks other than Anglo are valued at €12.3bn, including equity, preference shares and contingent convertible bonds, economist Pat McArdle said in a paper for the Institute of International and European Affairs, published in September.

The remarks by Mr Noonan are the latest policy change by the Government which is currently holding talks with European institutions aimed at finding some way of reducing the country's debt burden.

Mr Noonan has won some succour from French President Francois Hollande but little support from Germany, Finland, the Netherlands and Austria.

Accord

While the Government appears to be changing its tune on selling stakes in the banks to the ESM, Mr Noonan repeated that he intends to pursue an accord with the European Central Bank on the so-called promissory notes used to bail out Anglo Irish Bank.

Mr Noonan said the deadline for an accord on Anglo Irish is March 31, when the next payment to the central bank is due. ''Obviously we're not waiting until then," he said. "We're pushing for an earlier resolution on that."

Meanwhile, the minister said that while the Department of Finance has yet to finalise its revised growth figures, the expectation is that the growth figure for this year will be marked up, and reduced for next year.

"So it's not all bad news. They'll be an adjustment upward for 2012 and an adjustment downward for 2013," Mr Noonan said.

He also said Ireland could not agree to a financial transaction tax that did not include the UK, as it could put thousands of jobs at risk in Dublin.

Irish Independent

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