Wednesday 26 September 2018

FF calls for clarity amid QE policy fears

McGrath: “We need a strategy on how this is managed over the next number of years.” Photo: Tom Burke
McGrath: “We need a strategy on how this is managed over the next number of years.” Photo: Tom Burke
Dearbhail McDonald

Dearbhail McDonald

Fianna Fáil has called on the European Central Bank (ECB) to provide clarity on the link between Ireland's national debt and quantitative easing (QE), following signals from ECB president Mario Draghi that it intends to slow its QE programme.

More than a fifth of Irish Government bonds are held by the Central Bank and ECB.

However, data on asset purchases from Irish financial institutions as part of the ECB Asset Purchase Programme (APP) are not available publicly.

Data on the ECB's holdings of Irish Government bonds -bought as part of the APP - are also not publicly available.

Michael McGrath, Fianna Fáil finance spokesperson, said that if the ECB begins to reverse the QE programme, as the Federal Reserve is currently doing in the US by selling government debt back to the market, it would mean that the Irish taxpayer may have to pay significantly more interest on the debt that Ireland is due to refinance.

"In a worst-case scenario, if there is an economic slowdown and Ireland needs access to funds from the market, the cost of that funding will be significantly greater," said Mr McGrath.

"This only serves to highlight the importance of a 'rainy-day fund', whereby the need to go to the market will be reduced."

Mr McGrath said Finance Minister Paschal Donohoe needs to seek clarity on the situation from the ECB.

"We need a strategy on how this is managed over the next number of years," said Mr McGrath.

"Nobody is denying that the ECB quantitative easing programme has been hugely beneficial to the European economy, but it is inevitable unwinding needs to be managed."

Irish Independent

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