ECB chief rejects Noonan plan on Anglo bond debt

 

EUROPEAN CENTRAL Bank chief Jean-Claude Trichet has ruled out supporting Minister for Finance Michael Noonan in his push to avoid repaying some of the debt owed by Anglo Irish Bank and Irish Nationwide Building Society.

Although Mr Trichet expressed frustration yesterday at the frequency with which this topic has been raised with the ECB, he had high praise for the State’s execution of the EU-IMF bailout deal.

“When I look at Ireland, I see a country which is gaining credibility regularly,” he said.

With notional Irish borrowing declining in recent weeks from the record levels seen earlier this year, Mr Trichet said the improvement in credit-worthiness was evident.

Mr Noonan has been seeking talks with Mr Trichet to advance proposals to impose losses on senior unguaranteed unsecured bondholders in Anglo and Irish Nationwide, which are now merged.

While such bonds benefit from the highest form of legal protection against default, the holders have no right to any other Anglo assets if the money is not repaid. Neither are they protected by the State banking guarantee.

Between them Anglo and Irish Nationwide owe about €3.8 billion on such bonds, with repayment due on November 2nd of a $1 billion (€719 million) Anglo note.

Although Mr Noonan and Mr Trichet are likely to meet next week on the margins of a finance ministers’ meeting in Poland, the ECB chief indicated that the bank sees no reason to relax its opposition to any such manoeuvre.

Mr Noonan has argued that it is appropriate to go down this road in view of the acute financial pressure on the State and the fact that Anglo and Irish Nationwide are no longer functioning as banks.

The Minister has declared support for his stance from the International Monetary Fund but the ECB, which fears undermining confidence in other weakened euro zone banks, is not for moving.

Asked at a press conference whether his attitude had changed, Mr Trichet said there was “absolutely no change” to report.

Earlier, he reiterated the importance of euro countries honouring all their financial obligations in full: “All euro area governments need to demonstrate their inflexible determination to fully honour their own individual sovereign signature, which is a decisive element in ensuring financial stability in the euro zone.”

Asked to explain the ECB’s position, Mr Trichet questioned why the issue arose repeatedly. “I don’t understand too well why this is recurrent and recurrent and recurrent, frankly speaking,” he said.

“Our reasoning is and was very simple. Do all what you [can] to improve your credit-worthiness . . . This is the reasoning, as simple as that. I have nothing to add at this stage. I have no information on any message which would be addressed to us.”

On Ireland’s position generally, he said: “It is a country which is following its path, has demonstrated capacity to implement what had been decided and is increasing its credit-worthiness it seems to me very visibly.

“And, of course, we can do nothing but anchor Ireland in this path. I would say improving confidence is per se an element of growth activation which is of course of extreme important.

“So continuing in this direction is good for the confidence in the country, the confidence of the external side in the country and growth and job creation.”