More than €30bn in 'extra credit' until 2013

MORE THAN €30 billion in loans would be available from the new pillar banks between now and 2013, Minister for Finance Michael Noonan told the Dáil.

He said the Central Bank had estimated that small and medium enterprises and mortgage credit of €11 billion to €16.5 billion of gross new lending would be required in total over the next three years.

“The plans to be implemented by the banks will provide head room for extra credit in the economy of in excess of €30 billion over three years,” said Mr Noonan.

Opening a series of statements on bank reorganisation, the Minister said withdrawals from AIB and the Bank of Ireland had been significantly reduced since the publication last Thursday of the banking stress-test report.

He warned that while the response was positive and would help to build up confidence, he appreciated that “confidence is a fragile flower that can fade under the stress of international events”.

The Government, he added, saw the restructuring of the banking system as the first measure to restore confidence in the economy and to provide credit lines to make it grow again.

“There is money out there but people are afraid to spend it,” Mr Noonan added. “If we can get people back to a normal pattern of spending, the service sector in the domestic economy will begin to grow.”

Mr Noonan said the Government’s strategy was to change the people’s thinking by introducing a jobs initiative by way of a budget next month. “That will be the second plank in trying to return confidence, move the economy forward and get people back to work.”

Fianna Fáil finance spokesman Brian Lenihan said the Minister had built on the previous government’s policies.

The outlines of the Minister’s speech, he added, were clearly derived from the EU-IMF agreement concluded last winter.

“There is nothing in that agreement, arranged with the previous government, that is not implemented in the Minister’s policy,” he added.

Mr Lenihan said the Minister had, by and large, taken a constructive approach but he had given a more extensive guarantee than was given in September 2008.

“Throughout the period of great difficulty in the past two or three years, when a number of initiatives were taken, the Minister can hold his head high as one of those who took a very responsible approach on banking,” Mr Lenihan added.

He criticised Labour for its policy in opposition and warned that if there was ongoing talk about burning bondholders, as Sinn Féin engaged in, they could hardly be surprised if depositors wanted to remove money from the Irish banking system or had very little faith or confidence in it.

Sinn Féin finance spokesman Pearse Doherty said it sickened him to listen to Mr Lenihan “throwing out accusations that I and others in my party, along with many others who are not involved in politics, who are not involved in the international markets, who are economists, academics and international observers, are involved in economic treason”.

He accused Mr Lenihan of “maybe struggling to find words . . . that could distinguish his ideas from those of the Government because it is following the road map he laid down”.

Clare Daly (Socialist Party, Dublin North) said the general election had resulted “in the same circus with different clowns”.

She said it was an affront to people that the Minister for Finance was now embracing that which he referred to as an obscenity during the election campaign as representing the best way forward for the country.

Mattie McGrath (Independent, Tipperary South) said a burden was placed on every man, woman and child and on future generations by the previous government.

“I am devastated, as are the public, by the reaction of the new Minister and members of the new Government,” said Mr McGrath. “This is pitiful. There was a huge vote demanding real change.”

People were yearning for change and had voted for it, he added.

“They were misled by the statements of both opposition parties about what they were going to do in government.”