Noonan coy on claim ECB wants bondholders to pay

Finance Minister Micheal Noonan has downplayed suggestions senior bondholders in bailed out banks could be forced to take major losses.

Opposition parties have demanded the Government takes firmer steps to try and push the matter after the Wall Street Journal reported that ECB president Mario Draghi called for such measures against Spanish investors at last week’s meeting of eurozone finance ministers.

Such a shift in attitude would mark a major policy U-turn by the ECB after they blocked attempts to impose financial penalties on senior bank bondholders in Ireland.

The possible change in stance was downplayed as “speculation” by Mr Noonan’s spokesperson, but the Government stressed that was the outcome it would be seeking in ongoing talks.

Mr Noonan meets ECB chiefs in Frankfurt today and Fianna Fáil finance spokesman Michael McGrath called on him to clarify whether EU finance ministers blocked Mr Draghi’s attempt to make senior bondholders pay.

Mr McGrath said: “These reports, if true, would represent an extraordinary U-turn by the ECB and would greatly strengthen Ireland’s hand in the negotiations surrounding the €64bn recapitalisation of Irish banks.

“It is reported that the eurozone finance ministers rejected the proposal by Mario Draghi that senior bondholders take losses for fear of how the financial markets would react,” Mr McGrath said. “This change of heart by the ECB is an acknowledgement that it was wrong in Ireland’s case.”

Sinn Féin’s Gerry Adams described the development as “very significant”.

Tánaiste Eamon Gilmore was also downplaying the matter.

“The memorandum of understanding in relation to Spanish banks is still being worked upon. From time to time there is speculation about what may or may not be in it. We’ve all got to be careful about following such speculation,” he said.

“The memorandum of understanding is not yet concluded. Clearly it would be helpful to Ireland if it were to turn out that way. But I think we have to be careful about speculating about negotiations and discussions that are still under way.”