Business World

Monday 25 September 2017

Burning senior bondholders 'not on table' -- Rehn

Commissioner rules out Fine Gael proposal

Finance Minister Brian Lenihan speaking after the Ecofin meeting of European finance ministers in Brussels yesterday
Finance Minister Brian Lenihan speaking after the Ecofin meeting of European finance ministers in Brussels yesterday

Laura Noonan and Sarah Collins in Brussels

EUROPE has told Ireland in no uncertain terms that the issue of forcing losses on "senior bondholders" who loaned money to Irish banks is "not on the table" -- dashing Fine Gael's hopes of getting European support for the move.

European Commission economics chief Olli Rehn confirmed the bloc's position on senior bondholders at a Brussels briefing yesterday, as Finance Minister Brian Lenihan described Europe's "shock" at the political debate in Ireland about the merits of inflicting losses on senior bondholders.

Mr Rehn and Mr Lenihan were speaking after two days of meetings between Europe's finance ministers, which were largely focused on ironing out new economic governance rules that would insulate Europe from another sovereign debt crisis.

Addressing the press after the gathering, Mr Rehn confirmed that Ireland's debate about whether banks' so-called 'senior bondholders' should share the cost of the banking crisis had featured in the talks.

"There is simply no appetite for considering senior bondholders in this context," Mr Rehn said. "This issue is not on the table and that was made very clear."

Mr Rehn's comments came just hours after Fine Gael published its election manifesto claiming that the party would only force losses on senior bondholders if there was European consensus on the issue.

Previous comments from Fine Gael had led some to expect the manifesto to promise unilateral action on senior bondholders in Anglo Irish Bank and Irish Nationwide, so that those who loaned billions to Ireland's most troubled banks would have to share the cost of their collapse.

Both the European Commission and the ECB are against the move, fearing that it could create a precedent for forcing losses on senior bondholders across the continent, which would then make it harder for all banks to raise cash from investors.

"There is considerable shock in Europe about the whole debate around bond default," Mr Lenihan said yesterday. "They see it as damaging the confidence in the Irish banking system." The finance minister refused to be drawn on the details of discussions around reducing the 5.8pc interest rate Ireland will pay on the €40bn from the European bailout fund, saying only that the issue was being "looked at".

Greek finance minister George Papaconstantinou said Ireland and Greece were not "talking about concessional" interest rates on the cash, which Europe can get for 3pc in the market. "There is a big margin between what we have today and what concessional rates would be," he stressed.

Agreed interest rates would see the bailout fund making a profit of more than €1bn from Ireland in the first year, but Mr Rehn has said the commission would "support" a revision of those rates.

An announcement is expected after an EU summit on March 24 and 25, where leaders will firm up proposals for economic governance.

For Ireland, much will also depend on the outcome of a parallel Franco-German bid to harmonise tax, labour and social security law across the bloc.

German chancellor Angela Merkel is reluctant to agree to more lenient bailout terms without promises of extra discipline in return, with talks on that pact scheduled for 11 March.

Irish Independent

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