Fine Gael and Labour rule out any immediate bank recapitalisation

 

THE LEADERS of the two main Opposition parties have ruled out any immediate recapitalisation of the banks if they are elected to form the next government.

The new government should postpone any further bank bailouts until April, when the Central Bank’s stress-testing of the lenders is complete, said Fine Gael finance spokesman Michael Noonan.

Labour party leader Eamon Gilmore was even more emphatic, saying his party would not put any further capital into Bank of Ireland, AIB and EBS building society before renegotiating the bailout with the International Monetary Fund (IMF) and the EU.

Under that renegotiation, Labour would insist on “burden sharing” with bondholders as part of bank restructuring, he said.

Mr Noonan described as a “political stroke”, Minister for Finance Brian Lenihan’s announcement on Wednesday that a further capital injection into the banks was being postponed until after the election.

“If there is no government until somewhere on March 9th, or some days later, I think it’s prudent for an incoming government to wait for the results of the stress-testing before they commit to putting the €7 billion in,” said Mr Noonan.

There was still hope that the Bank of Ireland might not need government funds, he said, and would be able to get some funds on the private market, if it got a good recommendation on March 31st.

That would reduce the amount required, he added.

Mr Lenihan rejected the suggestion that he had “pulled a stroke”.

If Fine Gael and Labour write to him asking to inject up to €10 billion into the banks before the general election, he will immediately accede to their request, he said.

Mr Gilmore said it was “amazing” the Fianna Fail government insisted the terms of the bailout were not negotiable, yet it “unilaterally” decided to take one element of the deal and delay it until after the election.

Fianna Fáil didn’t have a mandate to agree the programme with the IMF and EU when it did so last November, he said. “The deal was negotiated by a government that was weak, that was on its last legs, that clearly didn’t have authority and that’s now admitting that it doesn’t have a mandate to implement it,” he said.

Mr Noonan also suggested the Minister was not being fully forthcoming about the severity of the problems at the Irish banks.

“If he has any kind of indication that there might be a bigger black hole in the rest of the banking system, I think it’s prudent that we will wait for the results of the stress test to see what the real position is,” he said.

Mr Noonan admitted Mr Lenihan’s postponement decision had surprised him, because the Minister had maintained that nothing could be renegotiated, and then “in one fell swoop” changed a crucial date of a bank restructuring.

Mr Noonan said he initially understood the decision had been taken with the agreement of the IMF, the ECB and European Commission, but he did not believe that any more. “To put it quite bluntly, I think Brian Lenihan was misleading people,” he said.

The Minister said that the postponement of the recapitalisation had been agreed with the understanding of the EU and the IMF.

Mr Noonan said that in the last week of the election, a Fianna Fáil Minister “didn’t want to be announcing further black holes in the bank and drag the national debate back into the banking crisis”.

Fianna Fáil politicians wanted to keep banking off the agenda because of public anger they were encountering on the doorsteps, where “even the dog barks at you if you say Anglo Irish Bank”.