Weber: Irish aid will stabilise banking system
Published 22/11/2010 | 15:15
European Central Bank council member Axel Weber said the bank is confident that the aid package for Ireland will stabilise the country’s banking system.
“The Governing Council of the ECB welcomes the request of the Irish government for financial help from the International Monetary Fund, the European Union and the euro region’s member states,” Weber, who heads Germany’s Bundesbank, said in a speech in Munich today.
“We’re confident that this program will contribute to safeguarding the stability of the Irish banking system and put it in a position to fulfill its role for the functioning of the economy.”
Ireland yesterday became the second euro member to seek a rescue from the EU and the IMF as the cost of saving its banks threatened a re-run of the Greek debt crisis that destabilised the currency.
Still, a package that Goldman Sachs Group estimates may total €95bn failed to damp speculation that Portugal and Spain would need to tap the emergency fund set up after Greece’s bailout.
Weber said the establishment of a permanent crisis resolution mechanism that can be used to restore confidence in a nation’s ability to finance its debts is “necessary and sensible.”
Such aid should be tied to strict conditions and be used only when the stability of the monetary union is in danger, Weber said.
“In order not to distort incentives for investors, private creditors shouldn’t be relieved of their responsibility either,” he said.
“However, so as not to affect current contracts, I consider it sensible for such a mechanism to be established for the time after the crisis.”
Weber called on governments to press ahead with fiscal consolidation, saying a failure to do so could fuel inflation expectations and force the central bank to tighten monetary policy.