AIB HAS submitted an application to the Department of Finance to negotiate a salary higher than the €500,000 cap set on bankers’ pay for its new chief executive, Minister for Finance Michael Noonan said yesterday.
Mr Noonan said his department would consider the application as a matter of courtesy, but seemed negatively predisposed: “They’d want to make an extremely good case before we’ll change,” he said.
Mr Noonan noted that AIB is 98 per cent owned by the State, and that Government salaries, including the Taoiseach’s, are capped at €200,000.
He said the €500,000 cap on bankers’ pay was “two and a half times what the Taoiseach gets.
“Banking is very important, but running the country is very important as well.”
The Department of Finance has received a shortlist of candidates for the position. Mr Noonan would not say how many candidates there are, or how many of them are not Irish citizens.
AIB may argue that banking salaries have recovered and €500,000 is not enough.
“Certainly salaries in London have always been quite high,” Mr Noonan said. “But there are other banking systems where salaries are lower. The banking industry in Holland, for example, doesn’t pay the extravagant salaries that have been the norm in these islands.”
The likelihood that the Government will refuse to pay hundreds of millions of euros to senior bondholders from Anglo Irish Bank is receding.
Mr Noonan said he had discussed the matter with Jean-Claude Trichet, the president of the European Central Bank, last week in Poland. “He is even stronger against the idea now than he was last March when I first discussed it with him.”
Mr Trichet told Mr Noonan that “burden sharing with private sector banks has been tried in Greece and the immediate effect . . . was to transfer pressure onto Italy and Spain. And certainly the European authorities are terrified at this juncture of any action which would be taken as a credit event, which would kick on to other European countries.”
Ireland has been doing so well, the Minister said, “that it would be imprudent to risk all the ground we have gained and all the credibility we’ve achieved, particularly in the markets, for the sake of a relatively small amount of money which actually isn’t a charge on the Irish taxpayer anyway.
“It’s coming through the liquidity flow from the Central Bank into Anglo Irish.”
The Minister said Ireland “might be able to talk around a different arrangement for the promissory notes on Anglo Irish Bank”.
If European authorities were to supply “long-term money at low interest in exchange for the short-term commitments that we have at Anglo” it would constitute “a quantum move down” in the Irish debt burden, a reduction worth billions of euros, he said.
Mr Noonan told the Wall Street Journal that cuts in the budget for 2012 were likely to exceed the €3.6 billion previously planned.
The Minister based this prediction on projections by the ESRI that growth will be 2 per cent rather than 2.5 per cent next year. He said he made clear in the Dáil last June that €3.6 billion was the “ways and means to arrive at the target”, which is to reduce Ireland’s budget deficit to 8.6 per cent of gross domestic product. Ireland will cut whatever is required to meet that target, he added.
“We have to continue to build up confidence,” Mr Noonan said. “We must have hard figures in our budget assumptions.” For too long, in previous Irish governments, “soft figures went in and targets were not reached,” he said. “It’s vitally important that the targets we set will be met at the end of 2012. That gives us the base to go forward then and get out of this frightful fix that we are in.”
