Dukes wrong about bailout, says Lenihan

FINANCE Minister Brian Lenihan has rejected the claim by the chairman of Anglo Irish Bank that the €35 billion EU/IMF bank bailout will not be enough to cover a wave of mortgage defaulters.

Anglo chairman, Alan Duke had predicted the contingency fund would fall short when anticipated losses on residential home loans started to bite.

But Mr Lenihan said this was not the case and instead backed the more optimistic assessment of the governor of the Central Bank, Professor Patrick Honohan.

The governor estimated the EU/IMF package would meet the losses and as little as €10bn could still be sufficient to ensure the banks were able to trade.

“I trust the governor,” the minister said.

Numerous commentators have warned that the prospect of rising interest rates in Europe would jeopardise a large number of tracker mortgages and compound the money lost on development and commercial loans.

At a press briefing, Mr Lenihan said Prof Honohan had stress tested the banks and measured the potential problems.

“He has not been wrong on anything to date and I do not believe he will be proved wrong on this issue either,” he said.

The EU and IMF officials examined the banks during the recent bailout negotiations, Mr Lenihan said, and “no black hole appeared in the mortgage books”.

He said Alan Dukes had done very good work as chairman of Anglo but that the bank did not have a notable mortgage book for him to base his figures on.

The minister accepted there were concerns that a wave of defaulting homeowners would heap unsustainable pressure on the hobbled banking sector.

But Mr Lenihan said the pessimistic predictions had not materialised and, so far, the indications were homeowners would meet their repayments.

He said the level of default was linked to trends in unemployment and this had stabilised.

In addition, the number of accounts in arrears slowed for the second month running.

Measures to recapitalise Bank of Ireland and AIB will be brought to the Dáil tomorrow. This will be in line with the bailout announced as part of the overall EU/IMF package.

The law will be introduced ahead of the Government’s attempt to win the support of the Dáil for the EU/IMF bailout deal.

Firing the opening shots in this debate, Mr Lenihan tackled the opposition’s suggestion that the interest rate on the bailout deal could be renegotiated.

He said he had spoken to European Economics Commissioner Olli Rehn yesterday and according to the minister, Mr Rehn confirmed the interest rate could not be renegotiated.

Mr Lenihan said there were three different rates built into the deal and, in the case of the highest offer, from the euro stability fund, a new rate would have to be worked out with 14 other member states.