Concern at refinancing challenges 'overdone'

THE CHIEF executive of the National Treasury Management Agency (NTMA), John Corrigan, said concerns about the country’s banks refinancing challenges at the end of September are “overdone”.

The Irish banks have about €25 billion in debt to be refinanced before the Government’s original two-year blanket guarantee ends next Wednesday.

“We’ve characterised concerns around that like the millennium bug,” said Mr Corrigan.

“We all thought the planes were going to fall out of the sky, the trains were going to stop, the clocks weren’t going to work.”

The authorities are prepared to make up any shortfalls, he said.

Stockbroker Davy said Irish banks were “coping” with their September maturities due to pre-funding earlier this year and “ample qualifying liquid assets”.

AIB, Bank of Ireland and Irish Life Permanent told Davy in briefings that they see “little respite” from high funding costs.

“The impact of negative sentiment towards the sovereign has prevented public debt issue by an Irish bank since April 2010,” said the broker. However, they said the EU restructuring approval process may address the “dysfunctional” deposit market.

The broker said AIB hoped to have further development on asset sales by the end of September as it seeks to raise €7.4 billion in capital by an end-of-year deadline.

Meanwhile, the European Commission said the surprise contraction in Irish economy in the second quarter should not derail the Government’s austerity programme.

The chief spokesman for economics commissioner Olli Rehn acknowledged huge pressure on the public finances but said the new data didn’t change anything in terms of the objective of reducing the budget deficit to 3 per cent by 2014.

When pressed as to whether the figures meant there would be any change in the speed or the level of the deficit reduction target, he said he was not prepared to extrapolate one set of quarterly figures for the entire year.

“We remain confident that the Irish authorities will take the necessary measures in order to meet their fiscal consolidation targets . . . That will be reflected in the budget for next year.”

He went on to say that recent statements by Taoiseach Brian Cowen and Minister for Finance Brian Lenihan “show clearly that there is a sense of responsibility, that there is a sense of the seriousness of the situation but also of determination to take the necessary measures.” He rejected the contention that the new figures implied the commission’s praise for the Government’s effort was in some way flawed.

“When it comes to growth figures, we always said that the recovery was on track but it was fragile and there were a number of uncertainties that could have adverse effects.”