Gilmore calls for renegotiation

Thu, Feb 10, 2011, 00:00

Labour Party leader Eamon Gilmore has said the Government's decision to postpone injecting a further €10 billion into the banks until after the election shows the bailout deal must be renegotiated.

Yesterday, Minister for Finance Brian Lenihan postponed injecting a further €10 billion into the banks until after the election – missing a key deadline under the EU-IMF bailout.

Speaking in Dublin this morning Mr Gilmore said the fact that Fianna Fáil was saying the deal could not be renegotiated and yet “unilaterally decide to take one action in relation to it” proves the Labour view that the agreement can and will be renegotiated.

"I find it quite amazing that a Fianna Fáil government, that tells us that we can’t renegotiate the IMF deal, can unilaterally take one portion of the deal and decide they are going to postpone implementing it because their happens to be an election," he said.

“I think that the decision again underlines what the Labour Party has been saying and that is that we have to renegotiate the terms of that deal and that includes renegotiating the terms that relate to bank restructuring.”

Fine Gael finance spokesman Michael Noonan has said Minister for Finance Brian Lenihan's postponement of a further €10 billion into the banks until after the election was a "political stroke".

Speaking at the launch of Fine Gael's fiscal policy, Mr Noonan said he believed Mr Lenihan was misleading people. He said he did not think the decision had been approved by Cabinet, the ECB or the IMF. "This was motivated by the desire to have a political stroke," he said.

Last night, Mr Lenihan said the decision was taken with the approval of the EU, the IMF and the European Central Bank (ECB).

However, the IMF said the bailout conditions should be adhered to. It said last night that Ireland had the resources to recapitalise its banks and it was important that the delay was temporary.

The ECB also said that the terms of the EU-IMF deal should be adhered to. Mr Lenihan said he had received the approval of the Cabinet on the day the Dáil was dissolved to seek to defer the recapitalisation.

“I went to the EU Commission and liaised with the other two institutions and they all agreed to it. The decision would not have been announced without the approval of the three institutions concerned,” he said.

Explaining the decision, Mr Lenihan said the reality was the Government did not have a mandate to make the decision once it lost its Dáil majority. “I am following constitutional practice. It would be different if the Government hadn’t lost its majority,” he said.

Mr Lenihan said it was the Opposition parties which were claiming the deal could be renegotiated, and in those circumstances he did not feel he could proceed. “Obviously if Fine Gael and Labour agree to the recapitalisation, it could go ahead immediately. I am willing to brief them on the matter if they wish,” he added.

In a statement earlier, the Minister said he had informed the European Commission, the IMF and the ECB of the Government’s view that, because of the democratic process, this issue should be addressed by the incoming government.

The EU Commission declined to comment on the Government’s decision to renege on its commitment by the agreed deadline. It said, however, that it expects commitments under the EU-IMF pact will soon be met.

A spokesman for economics commissioner Olli Rehn said the EU expected the delay to be “temporary”, and for the recapitalisation to proceed as agreed.

Late last night, the ECB issued a statement, demanding the terms of the EU-IMF deal be fulfilled.

Mr Lenihan confirmed the next recapitalisation of Bank of Ireland, AIB and EBS building society involved a very large sum, adding this could be subject to “very substantial political misrepresentation” during an election campaign.

The three lenders were due to have been recapitalised to higher international levels by the end of this month under the Government deal with the EU and the IMF. Some €10 billion, to be sourced from the National Pension Reserve Fund, was earmarked for this purpose.