Rabbitte lets it out of the hat on funking bank policy

MINISTERS must have sighed with relief at the news that the front runner for the Telecom Eireann strategic alliance - the consortium of Dutch company KPN and Telia of Sweden - is to make an indicative bid. If a deal can be struck the Government can at least point to one success in the semi state area.

The way it is going, it will not be able to point to similar progress in relation to the much heralded third banking force, where Ministers are so far guilty of having "funked" a decision, to quote Minister of State Mr Pat Rabbitte

For a considerable time it looked as if, they were going to funk the Telecom decision too. The delay in deciding the terms for the alliance - with the issue only being seriously addressed a year after the coalition entered office - has put the whole, process at risk. The industry is changing, quickly and it remains to be seen whether" Telecom Eireann has missed the alliance boat.

Any prospective partner is still likely to want to know what the Government intends to do with the 60 per cent stake it will retain. Government Ministers have still to address this issue.

Following the decision of British Telecom to drop out of the Telecom Eireann bidding, the risk was that the entire strategic alliance process would fall, apart, which would be a major political embarrassment for the Minister for Communications, Mr Lowry, and his colleagues.

If the alliance talks collapse, then the Opposition will make hay over the Government's delay in finalising the terms and its lack of clarity over the long term future of the State's 60 per cent stake. In passing, it is worth asking why a substantial part of this stake should not be floated at some stage on the stock market.

The other - and related - crunch issue on which any partner will want reassurance" is whether Telecom can carry through its, promised restructuring plan.

The Government would be in a much stronger position to sell if the restructuring was further in train, although it can point to a substantial improvement in Telecom's finances over the past couple of years and a stronger cash flow.

While the Government could Still emerge with a deal from Telecom, it does," not seem to even want to try in relation to TSB Bank and other two State owned banks, ICC and ACC. A commitment to form these organisations into a "third banking force" was contained in the Government's programme.

It appeared that the logjam had been broken late last year when a key group of Ministers and advisers reconsidered a proposal to sell around 80 per cent of TSB Bank.

The proposal was to leave a decision on ICC and ACC to another day, letting them develop on their own for the moment.

Since then, nothing has happened. And despite recent comments by the Ministers for Finance, Mr Quinn, that he realised a decision had to be made, some sources continue to insist that political differences are blocking any move.

The Government owes it to the financial institutions involved to tell them where they stand, even if it is only to say that no decision will be made in the lifetime of the Government.

There appears no good reason why it should not sell off TSB to one of the two interested bidders - Ulster Bank and National Australia Bank. It must also clarify its position on the other two banks.

Mr Rabbitte's comment suggests that political differences lie behind the inaction in the banking area, perhaps because some Ministers still favour some form of State controlled banking force. Different visions in the Cabinet on the future of Telecom Eireann could also complicate the forthcoming alliance talks.

It is not too late for the Government to take a clear line on these two issues. But it soon may be.