Monday 11 December 2017

Noonan says ECB's Trichet vetoed debt write-down

Peter Flanagan

Peter Flanagan

FORMER European Central Bank president Jean Claude Trichet blocked a request from the Irish government to impose losses on senior bank bondholders, Finance Minister Michael Noonan claimed yesterday.

Speaking at an Oireachtas finance committee hearing, Mr Noonan said he had approached Mr Trichet soon after Fine Gael were elected last year about writing down senior debt but his plan was rejected by the then ECB boss. Both Mr Noonan and his predecessor Brian Lenihan have claimed that Mr Trichet prevented them from imposing losses on some bondholders. Neither man has ever produced any evidence for the allegations.

In response to a question from Sinn Fein finance spokesman Pearse Doherty, Mr Noonan said yesterday he "did ask for such write-downs" from the ECB.

"Days after coming into government, at the end of March 2011, I had long conversations with Jean Claude Trichet. He refused to allow any write-downs and I had subsequent conversations with him in Brussels at formal meetings where I repeated that request and he refused, for good and sufficient reasons from his perspective but not from my perspective," said Mr Noonan

Mr Noonan was at the committee to brief deputies on tomorrow's Eurogroup meeting in Luxembourg and the Economic and Financial Affairs Council talks that will follow on Friday.

He said he was "still reasonably confident" the country could return to the international bond markets later this year.

The minister confirmed that any European resolution on bank debt would need to be retrospective in order to cover the recapitalisation of the Irish banks by the Government here.

Although denying it was a 'red line' issue for the Government, he said it would be "very difficult" to agree to a deal on bank debt without including Ireland's own bank debts.

Talks on a pan-European financial transaction tax were included on the agenda at this week's meetings and Mr Noonan said the Government was not in favour of a transaction tax in its current form, while warning against the tax being used to provide the EU with an independent revenue stream.

"Traditionally the EU has been funded by contributions from individual states and we would be wary of changing that," he said.

"The other issue is how a tax would affect our own tax system. For example, the Exchequer would lose the 1pc stamp duty on share dealing. We would have to look at that."

Mr Noonan also cited potential job losses as a reason to oppose a transaction tax. A report from the ESRI commissioned by the Central Bank and which will be published shortly shows a tax would result in jobs leaving here, he said.

"We also have a historical example in the form of Sweden. When they introduced a tax, the jobs moved to London, and when Sweden eventually reversed the tax the jobs did not come back. It was too late and the reputational damage had been done.

"Some 33,000 people are employed in finance in Ireland and we as a government will not do anything to jeopardise those jobs," Mr Noonan claimed.

It would be helpful if the ECB pushed its inflation target up from 2pc, but that the target would still have to be closely controlled, he added.

"I would have no problem with a target of between 3pc and 4pc, but it could not be an open ended target," he said.

Irish Independent

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