Lenihan: Banking reports to spark action

THE Government should be able to take some steps on foot of the two reports into the banking crisis that has cost taxpayers more than €72 billion to date, Finance Minister Brian Lenihan has indicated.

The reports, from Central Bank governor Patrick Honohan, into the role of the Central Bank and financial regulator, and an overview from former IMF officials Klaus Regling and Max Watson, will be used as the basis of a banking inquiry.

Mr Lenihan, ahead of presenting them to government today, refused to divulge any details of the documents. “The reports are important because there will clearly be economic lessons. There will be conclusions from this report – not everything in these reports will lead on to another enquiry.”

Mr Regling and Mr Watson will appear before the Oireachtas committee on Friday and Mr Honohan will come before them the following week, he said.

Mr Lenihan, in Luxembourg for a meeting of eurozone ministers, said Ireland was not under any pressure to make further cuts in spending ahead of next week’s European Commission review of countries’ economies.

An IMF report presented to the meeting warned that countries with high debts facing high borrowing costs must make deep cuts or face a further loss of market confidence. “Delayed or half-hearted fiscal consolidation in countries facing high spreads could trigger a further loss of financial market confidence in the fiscal sustainability of some member states, a spike in risk premiums and a sharp depreciation of the euro,” the report, presented by IMF chief Dominique Strauss-Kahn, said.

“I do not detect any pressure on Ireland,” Mr Lenihan said, adding that the markets were not indicating pressure. But the planned cuts of €3bn, or close to 2% of GDP, will be carried out.

A growing number of countries are pushing for rules that would see governments forced to run surplus budgets and use the surplus to reduce their overall debt.

Mr Lenihan stated that Ireland had balanced or surplus budgets for many years, but said it had not averted the deep economic crisis the country found itself in.

The ministers are preparing plans for the future governance of eurozone countries that would include sanctions for states breaking the rules and countries submitting the broad outlines of their budgets for EU approval before they are finalised and adopted by national parliaments.

The ministers agreed to set up a limited company in Luxembourg to handle the EU’s €500bn contribution towards the €750bn fund intended to lend to any member state unable to raise money on the international markets.

They also approved Estonia’s application to join the eurozone next January, becoming the 17th member.