Lenihan ‘urged’ to use pension fund to ease debt

FINANCE minister Brian Lenihan has been urged by some senior advisersto allow the country’s €24 billion state pension fund to buy Irish Government bonds to support demand, an Irish official said yesterday.

The senior official, who declined to be named but is familiar with financial policy discussions in the Government, stressed that no decision to take such action had been made.

A spokesman for the Department of Finance, contacted by Reuters, said: “There are no proposals to do this.”

Tapping the fund could meet stiff political opposition.

Roughly €10bn of it is already earmarked to buy stakes in struggling Irish banks. But some officials now believe a change in the law covering the fund, which currently prevents it from buying Irish bonds, could help the country after its planned return to the debt markets to borrow money next year.

“That’s an asset that the Government has which they can choose to use — it’s there,” the official told Reuters, adding that the “firepower” of the €24bn fund could encourage other investors to buy Ireland’s debt.

“Under law, the fund is not allowed to invest in Irish government paper. To do that would require a change in legislation,” the official said, acknowledging that “raiding the fund” could prove politically difficult.

The suggestion is similar to one made Economic and Social Research Institute economist, John FitzGerald, a member of a new Central Bank Commission, who has recommended selling some of the fund’s investments.