Noonan denies FG lied about burden sharing

FINANCE Minister Michael Noonan has denied claims his party lied about forcing senior bondholders to foot bank losses as the opposition said ministers were reneging on their election pledges.

As Ireland’s debt rating fell even further, ministers conceded that the European Central Bank had told the Government to let senior bondholders escape paying for the latest bank bailout.

Mr Noonan defended the decision saying that if the Government had gone against ECB opinion, the move could have cut off the supply of cash for Irish banks.

“The Central Bank in Frankfurt are holding out solidly that the senior debt, senior unguaranteed bondholders, wouldn’t be touched. It’s a majority view in Frankfurt. On the basis that the bank is supplying almost €200 billion in liquidity to the Irish banking system, we wanted burden sharing but we would not do it unilaterally, we would only do it with the agreement of Frankfurt and we didn’t get the agreement,” he told RTÉ.

However, he said there was a possibility that senior bondholders with Anglo Irish Bank down the line could be forced to share some of the burden.

Mr Noonan denied that Fine Gael had reneged on a promise made during the election campaign to ‘burn’ the bondholders.

But he added that making them pay now would prohibit future investment in the two remaining large financial institutions, Bank of Ireland and AIB.

“It would inhibit their capacity to get funds on the market in two and a half, three years time if the people that they are going to be seeking the funds from have shared in the burden, by burning the bondholders,” he said.

Fianna Fáil yesterday declared that the coalition Government had done a U-turn on their election promises.

Party spokesman on finance reform Michael McGrath said: “It is quite clear now that Fine Gael and Labour misled the general public in Ireland in relation to the renegotiation of the EU-IMF deal. They indicated there would be a wholesale re-negotiation of that deal. They made it quite clear that they would be achieving burden sharing.

“Clearly they have reneged on that. In addition, they have failed to get the medium-term funding commitment from the ECB despite it being flagged in recent days.”

Labour’s Minister for Public Reform Brendan Howlin backed his fellow finance minister and denied the coalition parties misled the public during the election.

He told RTÉ that if senior bondholders had been burnt or forced to take some of the pain of bailing out bank losses, the Government might only have recouped possibly up to €4bn from those investors.

The move would have done huge damage to Ireland’s reputation and possibly cost the country more in the long term.

Mr Howlin said Labour did not pledge — unlike Fine Gael — that a red cent wouldn’t go to the banks without senior bondholders sharing the burden. He added that the two remaining big banks needed to convince investors in future.

“We were convinced at the end of the day for those two pillar banks, in order for them to get capital investors in the future, that they couldn’t start off by scorching the capital investors that they had, saying tomorrow ‘by the way we need more capital,” he said.