Bondholders must be hit in rescue plan -- Chopra
Banking failures and weakening economy led to 'downward spiral'
Any new rescue plan for European banks must see senior bondholders and shareholders who gambled being burnt, Ajai Chopra of the International Monetary Fund told the Kenmare Economic Conference in Co Kerry last night.
Mr Chopra said banking failures and the weakening economy fed on each other and led Ireland into a "crippling downward spiral".
He said the Irish Government had come to grips with its banking problems but that weakness in the domestic economy remained a concern.
"Unemployment is still very, very high... until unemployment also starts to come down, we shouldn't start to pop the champagne," he said.
In a much anticipated address, the IMF boss said the belief that light touch regulation and market discipline would ensure stable markets has been proved dangerously wrong by the crisis.
In his address Strengthening the Financial Stability Framework of the EU, he said the EU debt crisis was now at a critical juncture.
While Europe's leaders were scrambling to deal with the crisis, he said, provision of liquidity by the European Central Bank was "necessary".
Banks' capital buffers should be boosted, "ideally from private sources", while the use of Europe's bailout fund should be "flexible", Mr Chopra said.
Mr Chopra called for an EU-wide deposit insurance scheme and more coordinated regulation of the continent's banks to prevent contradictory national regulation from exacerbating its debt crisis.
Mr Chopra was in Ireland for the Troika's latest review which began last Tuesday. As he was speaking yesterday, G20 leaders in Paris pressed Europe to act decisively within eight days to resolve the euro debt crisis.
In unusually direct language, finance ministers and central bankers said next week's EU summit must "decisively address the current challenges through a comprehensive plan".
However, any attempts to change the Lisbon Treaty would be opposed by a majority of the Irish people, who are deeply distrustful of Europe, the latest Sunday Independent/ Quantum Research nationwide poll has revealed.
German Chancellor Angela Merkel is pushing hard for the idea of closer political and fiscal union. This would mean a further weakening of Ireland's domestic authority over its own economic affairs.
Yesterday, Ms Merkel criticised the USA for refusing to make the financial sector pay for the financial crisis and vowed to push for a financial transaction tax, at least in Europe.
"It's not acceptable that those outside the euro region, who are time and again pushing us to take broad-based action to manage the debt crisis, are at the same time flatly refusing to impose a financial-transactions tax," she said.
Meanwhile, it is clear that most Irish people do not believe that Ireland should agree to changes in the Lisbon Treaty as part of the package to preserve the euro, with 55 per cent saying no.
According to the poll, some of this reaction came down to a general distrust of the EU and its motives. Others felt the EU was to blame for inflating Ireland's boom through the lack of oversight and the dumping of cheap credit into our system and that it had no right to come looking for more concessions now.
"Absolutely not, we were conned twice already," one female respondent said.
Forty-five per cent of those polled did think that Ireland should agree to changes in the Lisbon Treaty as part of the package to preserve the euro.
These respondents thought the survival of the euro was important to our prospects.
"We must do anything we can to save the euro, it's important to keep us all united," said one male respondent.
Ireland's efforts to extricate itself from crisis are working and it should speed up its austerity programme where possible, the Organisation for Economic Co-operation and Development has said. A report by the OECD said that despite the crisis Ireland's long-term prospects were now better than many other hard-hit European countries.
Thousands of people took to the streets yesterday in London, Frankfurt, Madrid, Rome and Dublin as the 'Occupy' protests against capitalism and austerity measures spread around the globe. About 250 protesters in Dublin marched from Parnell Square to Government Buildings. There were no violent clashes -- unlike in Rome, where police turned teargas and water cannon on the crowds.