Markets don't believe our bailout figure, says Lenihan
Published 12/11/2010 | 05:00
FINANCE Minister Brian Lenihan yesterday admitted the markets do not fully believe the Government's figures for the bank bailout.
However, Mr Lenihan insisted Ireland will not have to go to the EU for emergency funding next year as the cost of borrowing hit record highs again.
European Commission President Jose Manuel Barroso said the EU was standing by to help Ireland if needed after the cost of borrowing broke through the 9pc barrier.
Mr Lenihan admitted the markets did not fully believe the Government's September announcement that the entire cost of bailing out the banks will be between €45bn and €50bn.
"There is no doubt in my mind that while the announcement on the banking sector in September was not disbelieved by the markets, it wasn't fully believed either because there is a wait and see policy of seeing whether it is an accurate account of exposures in the banking system," the minister said.
Mr Lenihan said he believed Ireland has the capacity "to put the State on a credible and sustainable basis".
He maintained the comments by Mr Barroso "highlight the solidarity of the eurozone".
"We've already received an amount of assistance from the European Central Bank. President Barroso was making it clear that Europe stands together."
He said a great deal of market speculation was based on the assumption that the euro currency is weak and would not stand market pressure.
Mr Lenihan was speaking at the launch of a report from the Oireachtas committee on finance and the public service, which recommended major changes to the management of budgets, as well as fiscal and tax policy.
The report, entitled 'Macroeconomic Policy and Effective Fiscal and Economic Governance', said the Government should introduce multi-year budgets and that deficits one year must be balanced by surpluses the next.
Another recommendation is that new fiscal rules should be established to ensure long-term spending is matched by taxes.
Fine Gael's finance spokesman Michael Noonan, who helped draft the report, said Ireland has not fully adjusted to the euro currency.
"Once the instrument of devaluation was taken from us, which we resorted to on a number of occasions in the 80s and 90s to restore competitiveness, a new regime had to be put in place and that was not put in place," Mr Noonan said.
"This suite of policies now positions us in a better way."
Labour's Joan Burton said the recommendations would allow Ireland "adapt and integrate" into a more structured approach from the EU which would take smaller countries into account.
"It's not enough for Germany simply to have a strategy around defending Spain and Italy as the ultimate of southern European countries," Ms Burton said yesterday.