Opposition vows to stop IMF-EU deal if too tough
The two main opposition parties -- Fine Gael and Labour -- both said last night that they could not adhere to any deal with the IMF and EU which would "crucify Ireland" or its people.
Both parties urged the Fianna Fail-led Government -- which is "on its last legs" -- to get the best deal for Ireland and said they would seek to renegotiate any aspect of the agreement which unfairly punished the Irish people.
A spokesman for Fine Gael leader Enda Kenny last night said: "Any deal over five per cent will be difficult and any new government must retain the right to amend aspects when it takes over. We confirmed this with the EU when we spoke to them."
Meanwhile, a spokesman for Labour Party leader Eamon Gilmore said: "Any deal at the penal interest rates we are hearing would crucify the country, we couldn't pay it.
"If a deal is binding legally, then any new government would have to adhere to it, but we would maintain a right to amend it."
It became clear last night that some default on senior debt was "almost certain" as part of the deal and more than €15bn from the National Pensions Reserve Fund would be used to recapitalise three of the country's banks.
Speculation that the €85bn IMF-EU fund would be liable to interest rates of 6.75 per cent was last night quashed, with the rate set to be between 5.5 per cent and six per cent.
According to sources close to the deal, the Government wishes to avoid drawing down money from the bailout for the banks. Instead, it aims to rely in the first place on money from the Pensions Reserve Fund and on the €20bn the State borrowed earlier this year to part-fund next year's Budget.
Negotiations also intensified yesterday over a major restructuring of the banking sector, with Anglo Irish Bank -- which was downgraded to junk status last Friday -- expected to be swiftly closed down.
There was also a strong suggestion that a merger of the country's two main banks -- AIB and Bank of Ireland -- was being considered during the negotiations, but the Department of Finance made no comment on this possible plan.
As of last night, as much as €35bn of the total EU-IMF loan was being earmarked for the banks.
The Government, however, would prefer not to tap this sum but to keep it in reserve for contingencies during the three-year programme.
According to senior sources last night, the Government wants to use the €15bn in the pension fund to recapitalise AIB, Band of Ireland and the Educational Building Society.
It has already used the remaining €10bn from the fund to buy shares in AIB and Bank of Ireland.
The Irish Nationwide Building Society, into which the State pumped €2.7bn, will also be shut.
Since AIB was unable to raise the €10.4bn that it needed to recapitalise, it is to be "virtually nationalised" using the pension fund money instead.
Some €50bn is expected to be available from the EU-IMF package to cover the country's fiscal funding needs over the next three years -- but only once Ireland has used up the €20bn that it raised on the markets over the summer.