Noonan rules out 'free-for-all' debt forgiveness

THE MINISTER for Finance Michael Noonan has categorically ruled out a universal debt forgiveness scheme for struggling mortgage borrowers, saying it was “ not a realistic option”.

Dealing with distressed mortgage was a complex issue, he said, and there was no “magic bullet” or one-size-fits-all solution.

Resolutions had to be found on a case-by-case basis through open and meaningful engagement between the borrower and the lender, the Minister told the Oireachtas Committee on Finance, Public Expenditure and Reform.

“If there is some kind of free-for-all debt forgiveness, there are a lot of people going to be in the queue,” Mr Noonan told the TDs and senators.

“You are all practising and practical politicians and you will be fairly aware of the clientele in every constituency, and you will have a queue down in the clinic looking for write-offs on Monday morning if there is any announcement of universal write-offs.”

The Minister said measures suggested by a group appointed by the Government to consider solutions for distressed borrowers would be implemented before the budget.

The issue of debt forgiveness has become the subject of growing debate as Central Bank figures released this week showed that more than 55,000 homeowners were more than three months behind on repayments.

The Minister said the banks had been extensively recapitalised and that some of that capital was available to write off bad debts.

“But the banks, of course, must be prudent in their actions and not fritter away their capital base through widespread unwarranted debt write-offs,” said Mr Noonan.

The planned reform of the bankruptcy and debt settlement arrangements would be key elements in any consideration of potential policy options, he said.

The Minister said also that eurobonds or some form of cross guarantee of state debt in the euro zone would be introduced to ease the crisis in the currency area.

The trend in Europe was towards an increasingly cohesive fiscal policy, said Mr Noonan.

The Minister said he intended to push for losses to be imposed on senior unguaranteed bondholders at Anglo Irish Bank, putting him on a collision course with the European Central Bank. He did concede though that this would be “a difficult argument”.

Ruling out an early budget, he said he may seek savings beyond the targeted €3.6 billion if global economic turmoil leads to weaker domestic growth in 2012.

It was “too soon to call” the exact level of savings to be sought but a decision will be made by next month. There would be no tax increases, such as on income tax, that would create further unemployment problems, he said.

During the lengthy hearing, the Minister clashed with his Fine Gael colleague Peter Matthews TD, who called for the Irish banks not to repay loans to the ECB and senior bondholders. “When I make suggestions like that to people in Europe, they think I am deranged,” Mr Noonan said.