Van Rompuy urges Irish rate deal
European Council president Herman Van Rompuy has called for a rapid solution to the impasse over lowering the interest rate on bailout loans to Ireland.
"I'm fully aware this is a sensitive issue for Ireland," Mr Van Rompuy told reporters today after meeting Taoiseach Enda Kenny at Government Buildings in Dublin. "We continue to work with our partners to find a solution."
The Government has failed to secure a reduction on the 5.8 per cent interest rate on the EU portion of the loans amid French demands that Ireland raise its corporation tax rate. Minister for Finance Michael Noonan has ruled out any cut in corporation tax, saying it is not up for negotiation.
Mr Van Rompuy, who is on his first visit to Ireland since taking up his position, commended the Government for the measures it has taken to address the economic crisis. "What you are doing is needed not only for your country but for the stability of the euro area as a whole," Mr Van Rompuy said.
Earlier, EU competition commissioner Joaquin Almunia said he is concerned about the Government’s plans to create two pillar institutions in the Irish banking sector. Speaking during a visit to Dublin, Mr Almunia said he would have concerns about the market power of the Bank of Ireland and Allied Irish Banks in the event of such a move.
“As a result of the Irish authorities' strategy to build the new banking system on two pillar banks, the Bank of Ireland and Allied Irish Banks will work in a de facto duopoly in the Irish market,” he said. “As European commissioner for competition, let me say that this prospect will require close surveillance, because duopoly may hamper competition in Ireland's banking market.”
Mr Almunia said he had no particular opinion on comments from Mr Noonan that he intended to inflict losses on senior bondholders in Anglo Irish Bank later this year. He said there were advantages and disadvantages to such approaches.
The European Central Bank is unlikely to back the move, with sources saying Frankfurt has not changed its resistance to any measures to impose losses on senior bonds.
Mr Noonan has said the Government’s plans were limited to Anglo and Irish Nationwide. The two defunct institutions owe €3.8 billion on senior unsecured unguaranteed bonds, of which €750 million is due to repaid by Anglo on November 2nd.
The Government plans only to impose losses on holders of these bonds and every “last red cent” of debt owed by the Government and the “pillar banks” – Bank of Ireland and AIB – would be repaid, he said.
During a speech to the Federation of International Banks, Mr Almunia said billions of euro in state aid granted to Anglo and Irish Nationwide would be cleared by the end of the month. He also said Bank of Ireland, Allied Irish Banks, Irish Life and Permanent, and EBS, which have completed capital and liquidity reviews, would have to present restructuring plans to the regulator by the end next month.