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Trichet urges EC approval as price of bank shares fall

European Central Bank president Jean-Claude Trichet has stressed the importance for the European Commission to sanction the restructuring plans for Bank of Ireland (BoI) and Allied Irish Banks (AIB).

Mr Trichet is understood to have impressed the need for urgency in Brussels to approve the bank's plans on foot of the Government's €3.5bn investment in each of the institutions.

BoI was recently forced to pay a dividend on its Government investment in shares rather than cash because the commission had not signed off on its restructuring plan.

As a result the State was forced to take a 16pc share in the bank. BoI shares yesterday fell 6pc.

Overall, the State now has in effect a 34pc stake in BoI.

In November, the group announced losses of almost €1bn for the six months to the end of September.

It is understood that Mr Trichet is keen that the European Commission approve BoI's plans so as to restore stability and confidence in the market.

Shares in AIB, which is due to make its first dividend payment in May, fell by 3pc yesterday.

Finance Minister Brian Lenihan admitted that the Government would have preferred to receive cash instead of shares because it would have helped contain the national deficit.

But he said the BoI shares received were going into the State's Pension Reserve Fund and would be left there for decades.

Previously, ECB chief Jean-Claude Trichet reiterated the need for the Irish Government to remain on "permanent" alert in the face of it economic challenge.

While praising the Government's efforts to restore order to the public finances, he adopted a cautious response to the suggestion by Mr Lenihan that the worst was over for Ireland.

Imbalances

Mr Trichet said last week that many members of the euro face "large, sharply rising fiscal imbalances, leading to less favourable medium and long-term interest rates and lower levels of private investment".

And he indicated that the Irish Government must take action to reduce the structural deficit by 2pc of GDP to achieve a deficit below 3pc by 2014.

"We all have to remain alert permanently," he said. "But let me also add that the decisions which have been taken by the Irish Government to put the house in order have been very impressive. I take it that they were right," said Mr Trichet.


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