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Top ECB official backs call to look at debt relief for homeowners

A senior ECB official last night backed calls from the International Monetary Fund (IMF) to consider targeted debt relief for homeowners in financial trouble.

Joerg Asmussen, a member of the powerful six-person executive board at the ECB, said recent research by the IMF which claimed such relief would boost the economy should be looked at "carefully".

However, he warned: "If you do this type of debt restructuring you need to do it very carefully in order not to have the restructuring too broad."

Mr Asmussen said household and mortgage debt is a serious issue for Irish banks.

"Irish banks are well capitalised but despite the progress that has been made there is some way to go to have a sound, stable and sustainable banking sector," he said.

Crucial

The IMF report, published earlier this week, outlined evidence from a range of countries where mechanisms have been put in place to cut household debt levels -- boosting personal spending and helping economic growth. The report said: "Bold household debt restructuring programmes can significantly reduce the number of mortgage defaults and foreclosures and substantially reduce debt repayment burdens."

However, it said a strong banking sector and government support was "crucial" to the success of such schemes.

Mr Asmussen, who is in Dublin to deliver a lecture at the European Affairs Institute today, reiterated the ECB's view that Ireland must continue to repay its debts.

Meanwhile, people are more worried about day-to-day living than they are about the future, a new survey reveals.

They are marginally more optimistic about the future according to the KBC Bank Ireland/ESRI Consumer Sentiment Index. It is the third monthly gain in a row.

The index increased to 60.6 in March, from 57.0 in February. The index for March last year was 59.5.

Irish Independent