Third of bad loans 'linked to outside deals'

One third of the bad loans being rescued by Irish taxpayers are linked to risky property deals located outside the state, it was claimed today.

The National Asset Management Agency (Nama) is buying up a total of €90bn in original borrowings from Irish banks but their current value is not known.

The initiative is aimed at cleaning up the balance sheets of banks to kickstart business lending and restore confidence in the banking system.

The National Treasury Management Agency (NTMA), which is setting up Nama, and Finance Minister Brian Lenihan refused to disclose what banks hold the loans or what developments they were linked to.

However Communications Minister Eamon Ryan told the Dáil one-third of the bad loans were related to property deals outside the state.

“Roughly one-third are outside the Republic, but half of that would be in Northern Ireland,” he said during the Budget debate.

Taoiseach Brian Cowen earlier said loans would only be purchased after they have been carefully vetted and valued by Nama officials.

Taking over the loans will immediately inflate the national debt which the NTMA tonight said was €54.2bn at the end of March.

Economist Peter Bacon, who advised the Government on the set-up of Nama, said: “We are cleaning the balance sheets of the organisations to ensure the institutions can resume their proper role as motors of credit in the Irish economy.”

Legislation is expected to be rushed through the Dáil in coming days while Nama officials negotiate discounts on the value of loans with the main banks.

The state body will pay for the assets through the issue of Government bonds to the lenders.

Profits from the eventual sale of the loans will be given to the state but if they make a loss, the Government will apply a levy on banks to recoup the shortfall.

Earlier Labour leader Eamon Gilmore said in the Dáil that the financial lifeline would see taxpayers propping up dodgy loans tied up in property deals in Bulgaria, Dubai, Florida and Latvia.

The claims sparked fiery clashes with the Taoiseach as Mr Gilmore accused Fianna Fáil of bailing out developer friends who ran up bad debts abroad.

Mr Gilmore said: “Not only is the Government going to buy back the property that these people speculated on in this country, but it is also going to buy back the property that they speculated on abroad – the shopping centres in Britain, the apartment blocks in Bulgaria, the hotels in Dubai, the retirement villages in Florida.”

But Taoiseach Brian Cowen said Nama’s purpose was to help free up credit to Irish firms.

“We aim to clean up the balance sheets so we can get back to good business,” Mr Cowen said.

But Mr Gilmore also claimed: “For the past six months, in dealing with banks and developers, this Government has been protecting and cosseting friends who brought down the Irish economy.

“Some of those friends have been investing and dabbling in property abroad and guess what, they are now going to use the Irish taxpayer and Government bonds for bad debts in Bulgaria, Dubai, Florida and Latvia.”

As the Ceann Comhairle tried to maintain order, an angry Taoiseach said he rejected Mr Gilmore’s claims with contempt.

“I will not accept from any deputy, however prominent, any suggestion that we are doing anything other than seeking to protect the public interest of this country to ensure that we get back to an economy that continues to grow and protects jobs,” the Taoiseach said.

“I regard with contempt the continuing innuendo that you are very quick to throw around. It does nothing for this debate or this country.”

He added: “You are playing a very serious game with Ireland’s reputation.”