Cowen defends bank deal

Taoiseach Brian Cowen tonight defended a radical €400bn state guarantee of all deposits and loans amid claims the deal has handed the country’s biggest banks a blank cheque.

Mr Cowen said the controversial two-year agreement was put in place to secure the stability of the country’s financial system in the face of the continuing turmoil in global markets.

“The option of doing nothing, of not making a move would put at risk the entire stability of the Irish financial system,” Mr Cowen told the Dáil.

The unprecedented safeguard applies to Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society (EBS).

Mr Cowen rebutted claims by Labour leader Eamon Gilmore that the Government had given a blank cheque to banks and had exposed taxpayers to a potential liability of €400bn.

The Taoiseach insisted: “I have not handed over any money to any bank.

“I have provided the reputation of this state to the banks to get access to funds so the economic life of this country can continue. That is what was necessary.”

“I could not as Taoiseach absolve myself of the responsibility of making the decisions.”

Strict terms and conditions will be attached to the agreement, which will also carry a hefty charge for the banks, according to the Government.

The deal, which will give the banks access to credit and lending across Europe, immediately shored up confidence among traders in the stock exchange in Dublin with the ISEQ closing up 8%.

Opposition parties called for tight regulation under the multi-billion euro scheme while Ireland’s biggest union, Siptu, said the six banks should be charged a premium rate for the guarantee.

Earlier, Finance Minister Brian Lenihan also called on the EU Commission to consider similar guarantees to bolster the banking system across the 27-state bloc.

Mr Cowen said the two-year period was necessary to convince the markets of the decisive nature of the Irish Government’s move.

He added: “What has been happening in Germany, in the Netherlands, in Belgium, in Luxembourg, in the UK and the US ... a situation emerged which made it clear to me that this was what was required.”

“The legislation will set out the mechanism that we’re putting in place,” he explained.