Germany wades in with bailout plan
Ireland’s €400 billion plan covers just six Irish banks and guarantees all current and future debts, not just for ordinary depositors but for commercial customers such as property developers and interbank loans.
The German scheme is expected to cover about €570 million but will be limited to guaranteeing the savings that all German ordinary, non-business, consumers have in any bank in the country.
Denmark’s scheme provides unlimited cover, like Ireland, but its banks have agreed with the government to contribute more than €7bn to the fund and will not be allowed to pay dividends to shareholders or offer new stock options to their management.
European Commission competition spokesman Jonathan Todd said the Irish guarantee is different to these as it covers more than retail deposits and is limited to Irish banks.
As a result it could create unfair competition, but he said the commission was not reaching any decision until the details had been finalised.
Commission officials have been in Dublin for the last few days trying to find ways to fine tune the scheme to enure it does not break state aid or competition rules.
Ireland’s main defence is that the circumstances were exceptional since the banking system was in immediate jeopardy and so the reaction was proportionate to the risk.
Foreign Affairs Minister Micheál Martin, in Brussels yesterday for meetings, said the scheme complies with state aid rules since the Irish banks will have to pay commercial rates if they need to draw down money.
“Our action is not disproportionate and we are in line with the rules,” said Mr Martin.
He added that the action the Government is taking is important, not just for the country, but also for the eurozone itself.
The commission says another difference between Ireland and other countries’ actions is they kept the commission in the loop, while all that was received from the Irish was a quick phone call after the decision was made.
The phones between leaders in the EU’s capitals were busy yesterday evening, however, as the British chancellor of the exchequer, Alistair Darling, said he would be asking the Germans to give details of their scheme.
The British were angry with the Irish as it puts pressure on them to behave similarly, with British banks losing customers to the Irish banks.
However, Mr Martin’s response was that the plan varies little from the first such intervention by the British, when they took over Northern Rock.
