Opposition: Nama plan has €15bn black hole

The Opposition heaped further pressure on the Government’s controversial ’bad-bank’ Nama tonight claiming the plan was built around a €15bn black hole.

Fine Gael warned interest rates would soar over the next few years from historic lows – piling billions more on to the cost of paying over the odds for failing loans.

Tánaiste Mary Coughlan rejected the criticisms claiming Nama was the most appropriate way of ensuring banks start feeding money to small businesses again.

“It is not our intention to lose money on Nama,” Ms Coughlan told the Dáil.

“And there are checks and balances to ensure that if there is any loss then it is a matter for the banks to pay through the levy.”

Fine Gael leader Enda Kenny claimed the predicted rise in interest rates set by the European Central Bank (ECB) would shatter the Government’s business plan for Nama.

He said they could quadruple to near 4% over the next decade – the timeframe set by Finance Minister Brian Lenihan for house prices to rise by 10% and Nama to break even.

Nama will pay out €54bn – seven billion over the current market price for failing loans.

Mr Kenny said applying the increased interest rates to the Nama plan – which involves lending through bonds or IOUs at the ECB – would add another €15bn on to the cost.

The Fine Gael leader claimed the Government would not be able to recoup costs if interest rates rose at this pace.

Economists have already questioned whether the 10% house price rise is realistic.

Junior coalition partners the Green Party are expected to press for several changes to the legislation setting up the ’bad bank’ over the coming weeks as members prepare to gather for a vote on the plan.

Environment Minister and Green leader John Gormley has warned failure to secure his party’s support could bring the Government down.

Meanwhile, Labour leader Eamon Gilmore claimed the public wanted to see action against bankers who were involved in inappropriate borrowing or lending which compounded the credit crunch.

“The public is not assured that investigations are ongoing – that’s what worries the public, it is going on and on forever,” he said.

“We have not seen any results from it.”