Ireland 'very courageous' in bank crisis

IRELAND HAS taken “very courageous” steps to tackle its banking crisis, a senior board member of the European Central Bank (ECB)said yesterday.

Speaking after an event organised by the Institute of International and European Affairs in Dublin yesterday, Spanish economist Prof José Manuel González-Páramo said the National Asset Management Agency (Nama) would be approved by the European Central Bank “soon”.

The EU is expected to give its judgment on Nama in the coming weeks. Newly installed competition commissioner Joaquin Almunia met Minister for Finance Brian Lenihan in Brussels earlier this week. While Mr González-Páramo declined to comment directly about the possible approval of the deal, he indicated quiet confidence that Nama would be approved by the ECB, commenting that Ireland’s proposal to deal with its troubled banks was a measure “in the right direction”.

Mr González-Páramo also said the ECB would withdraw the measures it introduced to assuage the effects of the financial crisis on a gradual basis.

“We have never proven that we stay aloof from what the market situation is. We have phased out a number of measures. The fact that market rates didn’t move proves that we were right.”

The ECB introduced a series of financial measures in response to the global economic crisis to help member countries struggling with the recession.

There has been concern about the effect the inevitable withdrawal of these measures may have on countries which are most dependent on them.

Mr González-Páramo said the ECB had decided to progressively phase out the measures.

“We rely on market-making as the main source of liquidity and short-term financing. We want the money market back on its feet.”

On the subject of Europe’s response to Greece, which he described as “a new peer pressure approach”, Mr González-Páramo said the Ecofin group of finance ministers would have to assess whether measures taken to ensure a reduction of 4 per cent of the deficit this year is achievable.

“The Greek government has committed that they will put in place additional measures. That’s what’s needed.”

He said it was essential that countries such as Ireland, Greece and Spain undertake fiscal and budgetary reforms.

“The main challenge for all euro area countries, but in particular for those who face the biggest problems in public finances, is to very specific in implementing measures and showing on a continuous basis indications of delivery,” he said.