ECB urges caution over Irish debt restructuring
HOUSEHOLD AND mortgage debt is a serious issue for Irish banks and proposals on how to deal with it will have to be considered carefully, a senior European Central Bank official has warned.
Joerg Asmussen, an executive board member of the Frankfurt-based ECB, said that research on the issue by the International Monetary Fund published earlier this week will have to be carefully looked at.
The IMF research found that “bold” household debt-restructuring programmes can help prevent recessions becoming deeper and more protracted. Mr Asmussen, a former senior official with the German federal ministry of finance, was speaking on RTÉ.
He said that while the level of private household debt in Ireland is worrying, any restructuring needed to be done with care.
“Private household debt is an issue of concern,” said Mr Asmussen.
At the same time, any restructuring needed to be done “very carefully in order not to have debt restructuring too broad”, he said.
Mr Asmussen added that Ireland must continue to honour the payment schedule of so-called promissory notes used to refinance the bailed-out Anglo Irish Bank and Irish Nationwide Building Society.
“Irish banks are well capitalised, but there is some way to go before you have clearly a sound, stable and sustainable banking sector,” he said.
The State avoided a €3.1 billion promissory note payment due last month by issuing a long-term Government bond to Irish Bank Resolution Corporation, which is managing the winding-up of Anglo.
Minister for Finance Michael Noonan said negotiations are ongoing over the remaining €27 billion due on the notes, which the Government is hoping can be repaid over a much longer time period. – (Additional reporting Bloomberg)