Labour to reveal hand on bank guarantee scheme extension
Published 29/09/2010 | 05:00
THE Labour Party will decide today if it is going to support the extension of the state bank guarantee, which it so staunchly opposed two years ago.
The law to extend the guarantee covering six banks will be one of the main items on the agenda when the Dail returns today after the summer break.
Taoiseach Brian Cowen's leadership may be raised at a meeting of Fianna Fail TDs and senators due to be held before the Dail resumes at 2.30pm.
The Government faces into an increasingly difficult political environment over the coming months as it attempts to pass the forthcoming Budget with its slim majority.
Aside from the Budget, the impact of spending cuts, the jobs crisis and the future of Anglo Irish Bank will all be thrown at the Government by the opposition as evidence of the need for a general election.
The nervousness within the Coalition was evidenced by its anxiety to get a pair for Tanaiste Mary Coughlan for votes to allow her to travel to the US.
The Department of Finance will brief Fine Gael and Labour this morning on the details of the legislation to allow the guarantee continue when the original agreement runs out tomorrow night.
The legislation will be voted on tonight, but is unlikely to be a knife-edge result as the Coalition is likely to get support from some in the opposition parties.
The guarantee extension is slightly different on this occasion to the original agreement, which emerged on the fateful night of September 28, 2008.
A portion of high-risk debt will be removed from the bank guarantee and there will be a change to the structure of the fees.
After voting against the original guarantee, Labour's finance spokeswoman Joan Burton said her party would decide this afternoon on its approach to the new guarantee.
However, she was not ruling out giving her party's support to the extension of the guarantee.
"I want to get more information. I don't want to sign any blank cheques for Fianna Fail. We want to see the small print," she said.
Fine Gael finance spokesman Michael Noonan said his party would also decide on its policy at a frontbench meeting at lunchtime, but he indicated it would be supporting the legislation.
"In general terms, it seems to me an extension is warranted. We backed the guarantee two years ago. Our objection subsequently was we were not given the full information," he said.
"It seems to me in the present circumstances that an extension of some form of the guarantee is necessary," he added.
Two years on from the initial introduction of the bank guarantee, the Government will extend it to the end of the year, but remove a small amount of high-risk debt.
The bank guarantee effectively comes in two parts, the Covered Institutions Financial Support (CIFS) scheme, which finishes at midnight tomorrow.
Part of this scheme goes into the new Eligible Liabilities Guarantee (ELG) scheme, which is due to finish at the end of December, but elements of which are likely to be extended. The latest figures show the CIFS scheme covers €103bn worth of funds and the ELG scheme covers €153bn.
The extension of the bank guarantee, allied to the removal of a small amount of high-risk debt, estimated at less than €6bn, will be followed by the publication of the cost and timing for the plan to split Anglo.