Loan for toxic bank to hike national debt

THE EU could force the Government to include borrowings to fund the toxic bank it is setting up as part of the national debt.

That would add significantly to our debt/GDP ratio going forward and would put increased pressure on the national finances.

It is contrary to the hope expressed by Finance Minister Brian Lenihan when he announced the formation of the National Asset Management Agency on Wednesday, that the debt raised would not have to be added to the general government debt because of its intended use.

But Daniel Gros, director of the Brussels-based think tank, Centre for European Policy Studies, said: “The Government will have to issue bonds to buy the loans and this debt in principle would be a public debt”.

If it is kept apart from general government borrowing that would keep the government’s general gross debt relatively close to the 60% of gross domestic product (GDP) limit under the EU’s borrowing rules.