Pressure to submit plan to European Commission

IRELAND was under increasing pressure yesterday to submit its bank guarantee plan to the European Commission for clearance amid claims that it breaches EU state aid rules.

Several countries are concerned that they may be forced to follow Ireland’s example and give a blanket guarantee for all deposit and savings accounts in its banks.

Taoiseach, Brian Cowen, discussed the plan with the French President, Nicholas Sarkozy, during a visit to Paris yesterday.

He admitted that the British prime minister, Gordon Brown, had told him of his fears when they spoke by telephone on Tuesday afternoon.

“He reflected some of the concerns expressed by banks in Ireland not incorporated in the state,” Mr Cowen said, referring to banks with branches in Ireland but headquartered in other countries such as Britain and Denmark not covered by the state’s €400 billion guarantee.

“We have to make efforts to bring stability to our financial system in the ways that are available to us,” he said.

In an effort to allay fears that the package constituted state aid, Mr Cowen said it was taking account of commercial realities and would be paid for by the banking sector.

But amid reports that customers in Britain were moving money to Irish banks, a spokesman for Mr Brown said Ireland must look closely at its guarantee to ensure it complies with EU competition law.

The commission’s competition commissioner, Neelie Kroes, also made it clear yesterday that government action must not create an uneven playing field and distort competition.

She pleaded to governments not to act unilaterally but to include the commission. “Take the telephone and give us an opportunity to give you a hand”, she said.

While not directly mentioning Ireland, she said governments retreating to a national position proved to be a mistake after the bank crash 70 years ago.

“We are privileged to have the EU and the single market of 27 member states. Let’s not make a mistake. Let’s do it together,” she said.

Asked directly about the Irish position, Ms Kroes said: “We are in close contact with the Irish authorities and it is not wise for me to go any further”.

However it is understood the Irish Government had not been in contact other than with a quick call from an official in the early hours of Tuesday to say a package was being put together.

A Government spokesman said that once the complete package had been agreed by the Oireachtas and became law they would send the details to the commission.

Luxembourg’s prime minister and president, Jean Claude Juncker spoke of the need for EU countries to co-ordinate their reactions.

“There is an ad-hocism in the solutions we are proposing even if several of us are involved,” he said referring to the rescue of Fortis bank involving Luxembourg.

Rumours in Paris that the French were considering taking similar action were scotched by the prime minister, Francois Fillon, during a radio interview yesterday.

Mr Sarkozy sought Mr Cowen’s support for a plan he is devising to have greater cooperation among EU countries and in particular for his idea to have an EU regulator.

The Taoiseach said he would have to see the details of Mr Sarkozy’s initiative at the next EU summit but that a Europe-wide response would be helpful.