Rehn stresses Ireland's need to complete new bank tests
EU ECONOMICS commissioner Olli Rehn reiterated Ireland’s obligation to complete a new round of bank stress tests next month as he stepped up pressure on Portugal to “substantiate” elements of its austerity drive.
As the G20 finance meeting broke up in Paris on Saturday evening, European Central Bank chief Jean-Claude Trichet declined to comment on a big spike in the ECB’s overnight lending to the nationalised Anglo Irish Bank and Irish Nationwide Building Society.
The spike prompted a wave of speculation in markets that a large European bank was in trouble. Without naming the two institutions or confirming their receipt of expensive overnight loans from the ECB, Mr Trichet said he would examine whether any public statement should be made in relation to the case.
He told a press conference that there was no discussion on Ireland at the meeting of finance ministers and central bank chiefs from the G20 group of advanced and developing economies.
“On the particular case you’re mentioning, I have nothing to say, certainly today. I will see whether with the Central Bank of Ireland – because you mentioned banks in Ireland – whether there is anything to say. But at this stage I say nothing,” Mr Trichet said.
Mr Rehn said the EU authorities aimed to complete a new round of stress tests on European banks by the summer, but said the timetable for Ireland was not the same.
“For Ireland there is a different timetable, just to be clear. The Irish stress tests will have to be completed by mid-March, which is work going on for the moment.”
Officials in Dublin are currently carrying out a prudential capital assessment review and prudential liquidity assessment review of the Irish banks, which are due to be completed by March 31st.
Mr Rehn made no reference to reporters to the Government decision to postpone until after the election a €10 billion recapitalisation of Allied Irish Banks, Bank of Ireland and the Educational Building Society. Under the EU-IMF rescue plan, these cash injections were to have been completed by February 28th.
Amid warnings of a double-dip recession in Portugal from its central bank, the country’s borrowing rates are already at levels deemed unsustainable by market investors. However, Mr Rehn and Mr Trichet brushed off questions on speculation that the country may soon require an EU-IMF bailout.
Mr Rehn said preliminary figures suggested Portugal exceeded its deficit-cutting targets last year.
“Moreover, it is essential that Portugal will further substantiate the structural reforms that have been initially announced. This is work in progress and progress is being made.”
Mr Trichet declined to comment on the ECB’s renewed market interventions to buy Portuguese sovereign debt. He called on Lisbon to apply its austerity programme, remarks similar to his recent comments on Ireland.
“They all have commitments. They have to apply their commitments – it’s true for Portugal as well as for all others – as rigorously, as convincingly and as attentively as possible, and they have themselves to be ahead of the curve in all respects.
“It’s up to the countries to be convincing in making very clear to the market – observers, savers – the point that they are credible.”
In a BBC interview over the weekend, European Commission president José Manuel Barroso said the EU authorities were ready to support Portugal if required after the country had made the necessary reforms.
Mr Barroso, a former Portuguese prime minister, said it was not for Europe to tell the authorities in Lisbon what they should do.
“I’m telling them to make the reforms they need to do and afterwards if they feel they need the support, of course the European Union is ready to support them.”