Government ‘was not in loop’ for British loan talks

THE Government last night admitted it had not been in the loop when London discussed its proposed massive €8.4 billion loan to Ireland with other major world economies.

British Chancellor of the Exchequer George Osborne told the House of Commons “intensive private discussions” had been taking place in recent weeks with the G7, IMF and EU on plans for a bailout before the request from Ireland was officially made.

A Finance Department spokesperson said that as Ireland was not a member of the G7 — the world’s seven richest democracies, the US, Japan, Germany, Britain, France, Italy and Canada — it had not been aware of the talks.

Mr Osborne indicated to the House of Commons discussions had been on-going “in recent weeks” but he felt it wise to keep quiet about them. “But I can now report that we have been engaged in intensive private discussions with the G7, the IMF, the EU and the Irish Government on plans for the eventuality that Ireland would request support. At the G20 meeting in South Korea two weeks ago, I was one of the European Finance Ministers who issued a joint statement that provided a brief respite,” he told the British parliament.

The comments have re-ignited concern the Government deliberately misled the Irish people during the run-up to the IMF bail-out.

Mr Osborne said Britain needed to prevent the Irish economic situation worsening as British banks were exposed to the tune of €112bn in the Irish financial sector.

Britain also exports €29bn worth of goods and services to the Republic each year — more than it does to the emerging super economies of China and India combined.

A spokesperson for Finance Minister Brian Lenihan said: “The chancellor made clear in his statement to the British Parliament that he was involved in discussions about Ireland’s economic situation at other international fora (such as the G20 in Seoul) in which Ireland was not a participant. Mr Osborne has since spoken to the Minister for Finance on the telephone and there have been other telephone contacts between officials. Other than contacts on the margins of European meetings, there have not been direct, face to face, discussions between Ireland and the UK on this matter,” he said.

Meanwhile, regulators have not taken their eye off the ball in reining in British bank exposure to Ireland’s debt crisis, the head of the Britain’s Financial Services Authority (FSA) said.

Adair Turner, chairman of the FSA, told MPs the financial exposure of the British banking sector was “not out of line with what you’d expect”, despite market fears that have hammered bank shares in recent days. The FSA boss, appearing before a Treasury Select Committee hearing, was criticised for “regulatory failings” in letting banks have so much cash linked to Ireland.

Banks suffered further share volatility yesterday as fears failed to subside over the impact on the sector of Ireland’s woes, with reports suggesting the most heavily exposed — Royal Bank of Scotland and Lloyds Banking Group — have £54 billion and £27bn at stake respectively.

But Mr Turner told MPs the FSA bank stress tests took into account exposure to this country.

The FSA said it first met over Ireland at the end of 2008 and that there had been “nearly continuous’ conversations with the Treasury and Bank of England over its debt crisis.