Govt plays down debt relief speculation

Junior Minister at the Department of Finance Brian Hayes has described as "unrealistic" a blanket approach to debt forgiveness for mortgage-holders.

Some 200,000 mortgage accounts are currently in negative equity, with economist Morgan Kelly last week saying that a €6bn bailout for those struggling to cope would end the crisis.

"Spending €5bn to €6bn on mortgage forgiveness, mortgage principle reduction and allowing those hopelessly indebted to walk away from mortgages would probably solve most of the problem," he said.

The proposal appeared to gain traction over the weekend, when the Minister of State with Responsibility for Housing, Willie Penrose, said it should be considered.

However Minister Hayes has insistend that the Government has to keep a realistic goal in sight.

"Some kind of blanket approach which has a €5bn or €6bn price tag attached to it is unrealistic in my view," he said.

Government sources said Mr Hayes’s comments accurately reflected the administration’s current thinking, the Irish Examiner reported this morning.

A Government-appointed working group, chaired by accountant Declan Keane, has been tasked with examining the issue of mortgage over-indebtedness, and is expected to report back by the end of September.