Lenihan rejects claim of secret agreement on Anglo

MINISTER FOR FINANCE Brian Lenihan has rejected Labour Party claims that a “secret agreement” had been put in place earlier this year to inject €8.3 billion into Anglo Irish Bank.

Mr Lenihan also clashed with Fine Gael about what the European Commission had agreed to in relation to the restructuring of Anglo Irish Bank.

The heated exchanges came at the end of a Dáil debate on the banking crisis in which the Minister said the question arose about “minimising the cost of Anglo Irish Bank”. It was an issue “as to whether a good book can be identified within that institution, which can lessen further the cost to the taxpayer, but they are the real options here”.

He stressed, however: “We would all like to see the back of this institution, but it is not possible. The scale of the deposits, the exposures to the euro system and the exposures to senior debt are extensive and are in the order of €70 billion. That is a very serous liability to ask the taxpayer to pick up next week. I am not prepared to countenance default on senior debt for several reasons. First, half of the funding costs in Ireland for enterprise is funded from within Ireland.”

He said Ireland was “not an Iceland which has somehow acquired a series of foreign obligations and saddled them on its taxpayers. Half of the funding requirement in our banking system is domestically sourced and 80 per cent of the sovereign funding requirement for Ireland is externally sourced. Therefore, maintaining confidence in financial markets is an important issue for this country.”

Labour finance spokeswoman Joan Burton referred to the EU Commission’s statement about Anglo Irish Bank. It stated, she said, that earlier this year Ireland had notified a capital injection of €8.3 billion for the bank to be paid over 10 years.

Ms Burton said “the commissioner’s statement implies the €8.3 billion was agreed by the Minister with the commission some months ago”.

She accused the Minister of dealing “despicably” with the Dáil and the people of Ireland. “Why did the Minister not inform the House about this secret agreement some time ago with the commission to pump €8.3 billion into Anglo Irish Bank?”

Mr Lenihan angrily rejected her claims and said consent was obtained from the commission only on Tuesday on the eve of its statement. That, he said, was “when the commission agreed that the promissory note could be executed”. Earlier this year Ireland had notified the possibility of such an event.

“Notification is for a request for an approval. There is no agreement until there is consent.”

Earlier, Fine Gael finance spokesman Richard Bruton claimed that the commission had not accepted Ireland’s restructuring plan for Anglo Irish Bank. “It has given temporary approval to put in €8.3 billion and it may allow another €10 billion, but it said it is not accepting the restructuring plan for Anglo Irish Bank, it is demanding a fresh restructuring plan be presented to it in May and it is having an in-depth investigation of the Anglo Irish Bank situation. Within any reasonable interpretation, that is evidence the European Union has not accepted the restructuring proposals of the Government.”

But the Minister described his comments as unwarranted, and said they were engaged “in the closest possible discussions with the EU authorities about the appropriate shape of that bank”.

Insisting there was no in-depth inquiry, Mr Lenihan said there was detailed consultations taking place. “We are working very closely with the commission and when it makes inquiries it asks a question and we answer it.”