ECB chiefs: Ireland not being held to ransom

European officials have denied Ireland is being threatened to repay all the global money men owed billions by the country‘s bailed-out banks.

With the first review of the €85bn bailout loan deal complete, finance chiefs rejected claims that the Government is being held to ransom over the massive debts.

Klaus Masuh, a European Central Bank (ECB) official inspecting the exchequer books, denied Ireland is being forced into a crippling payback by German and French lending houses.

“There is no threat from the European Central Bank,” he said.

A delegation from the International Monetary Fund (IMF), ECB and European Commission (EC) has spent the last ten days trawling government finances, sizing up a jobs initiative and public sector spending review, and meeting business and trade union leaders.

Their report reads like a pat on the back for a potential €70bn bailout and radical reform of banks, swingeing pay cuts, tax hikes and government savings.

Headed by IMF deputy director in Europe Ajai Chopra, the mission said the Government has moved very quickly and was on track to meet commitments under the IMF-European Union (EU) deal.

“This programme is a lifeline for Ireland. It represents an Irish solution to an Irish problem and it enjoys our support,” Mr Chopra said.

“There‘s no doubt that there are very important changes ahead but we see implementation of this programme as being the key way forward.”

The only significant changes to the deal restores the minimum wage to €8.65 – one of the highest rates in Europe.

An employers’ levy, pay-related social insurance (PRSI), will be halved for minimum-wage workers to ease pressure on business costs.

On the property market, the National Assets Management Agency (Nama) “bad bank” will not open a phase two to transfer loans worth less than €20m from banks to its books.

It will be formally agreed on May 16.

Mr Masuh, the ECB‘s co-ordinator of country missions, rejected claims the IMF-EU deal was only on the condition that bondholders – the top financiers owed billions by Irish banks – can recoup their lending.

He said: “In our view, burden-sharing on the senior bondholders would have been risky for Ireland and would have undermined confidence in the banking sector.”

Former finance minister Brian Lenihan accused the Government of a u-turn on their attitudes to the rescue package.

“This is the same deal, with the same political priorities, identified by the last government,” the Fianna Fáil TD said.

David Begg, one of Ireland‘s most senior trade unionists, warned that, “politically”, Ireland is close to breaking point over the bailout loans.

The Congress chief said: “I make this point because the people from the EU and the ECB who are dictating the terms of our existence are not without responsibility (for the crisis), nor are they disinterested actors in determining who bears the burden of austerity.

“Be in no doubt that their primary objective is the protection of Europe’s banking system.

“We cannot carry the burden of debt and austerity being laid upon us without serious damage to our quality of life and a generation lost to unemployment and emigration.”

Sinn Fein finance spokesman Pearse Doherty accused coalition government partners Fine Gael and Labour of “default on their mandate”.

He said: “It is a sad day when our economic future is being decided by unelected figures outside of the State.

“The fact that the details of what is in the new programme will be discussed in Brussels, Frankfurt and Washington before they are presented to the people of this State is an affront to Irish democracy.”

The key points of the revised bailout agreement include:

* Minimum wage restored to 8.65 euro (£7.66) in exchange for 50% cut in employers’ PRSI;

* Ireland is on track for its commitments for the first quarter of 2011;

* The IMF, EC and ECB support plans for the Government‘s jobs initiative as long as it is revenue neutral;

* A second phase of loan transfers out of troubled banks known as Nama II, and dealing with borrowings under €20m, is cancelled;

* The IMF and Europe wants banks fully recapitalised by July 31.

The Congress umbrella trade union group claimed French and German banks have a €900bn exposure to economies on the edge of Europe, including Ireland, Greece and Portugal.

It also claimed these bondholders are fleeing the money markets, with the ECB forced to step in and cover banks with emergency funding.

The ECB is funding Irish banks with about €140bn of short-term loans to keep them in business.

Meanwhile, Taoiseach Enda Kenny said Government action on the banks, employment and spending would help provide the confidence needed for recovery.

He added: “The engine of our economic recovery has not been working the way that it should.

“The reason that the Government is now taking action across a range of areas is actually to get that engine working before you can give the fuel of confidence for people to get through this frustrating period of austerity and economic difficulties.”