The Government's legislation to underwrite €400 billion worth of Irish banks' deposits and inter-bank loans has been significantly delayed, Taoiseach Brian Cowen has acknowledged to the Dáil this morning.
Speaking shortly before 11am, Mr Cowen said the legislation will now not be ready to bring before the Dáil until "Wednesday, or Thursday" of next week - a timetable that would sharply clash with the Dáil debate on Minister for Finance, Brian Lenihan's Budget.
The Cabinet discussed the legislation last night, along with other preparations for the Budget, but further discussions by ministers and work by officials must be completed, Mr Cowen told Fine Gael leader, Enda Kenny.
However, Mr Cowen indicated that the need to cover Irish-operating, but foreign-owned banks is not the main issue still to be resolved, since he said he believed that it is possible to deal with them "sympathetically".
Instead, he indicated that there is a need to ensure that bank assets are "ring-fenced" to ensure that Ireland does not over-extend its cover for banks, or allow them to benefit unfairly against other European competitors.
Questioning the timetable, Mr Kenny said the Dáil should sit on Saturday to debate the legislation: "I really don't think it is appropriate to bring this on the top of the Budget".
The Taoiseach rejected criticism over what the Opposition said was the delay in introducing the State’s bank guarantee plan. Responding to a question from Labour Party leader Eamon Gilmore, Mr Cowen said work was ongoing in drawing up the scheme against the backdrop of an “evolving situation,” including the bank-rescue package announced this morning by the British government.
He said work was being carried out by the Department of Finance, Financial Regulator and the Central Bank to finalise a scheme "as quickly as possible", and that discussion on a draft scheme would take place later in the week with the European Commission on EU state aid and competition requirements.
Issues discussed earlier in the week between the Minister for Finance and EU Competition Commissioner Neelie Kroes are being factored in, with “particular priority” given to ensuring the scheme addresses subsidiaries of overseas banks with a substantial main street presence in the State.
“Every care” was being taken to create a scheme that would meet the State’s requirements, accommodate banks with a strong retail presence, and satisfy the EU’s competition concerns, he added.
Mr Cowen noted that “constructive and co-operative negotiations” had taken place with all parties to avoid "inordinate risk", with the situation in the United Kingdom having to be factored in.
Britain this morning unveiled a rescue package for British banks this morning that included plans to inject up to £50 billion of government money into the country's biggest operators.
Advice from the Regulator and Central Bank is that the assets of the banks involved in the guarantee exceeds their liabilities, according the Taoiseach. The scheme will provide adequate liquidity needed to give the banking system time and space to overcome the current difficulties, he said.
He told the Dáil that the Government move has helped to bring “some stability” to the liquidity question, and that how the banking sector proceeds is an issue for the Government, the sector, and regulators.
Mr Gilmore noted that the British government had attached conditions to its package in contrast to the Irish scheme. "What we appear to have is some kind of open-ended, unqualified guarantee for the banks."
Earlier, the Fine Gael leader said that as the Government had not yet finalised the guarantee scheme, the Taoiseach was not in a position to answer questions on it.
Instead, Mr Kenny queried why, in the current economic climate, the HSE had put in place a bonus system for 2009 totalling €1.4 million, a 20 per cent rise on 2008.
The HSE's performance did not warrant any bonus increase, the Fine Gael leader said, and he urged the Taoiseach to state these would not be paid.
But Mr Cowen responded that HSE contractual arrangements referred back to recommendations of a review body on remuneration in the public sector that aimed to set out pay scales related to performance and targets to compete with the private sector.
Awards should be related to achieving challenging targets, and the HSE board would take into account the new economic situation, the Taoiseach said, but he added that that contracts could not be discarded “willy nilly”.
“Despite all that has been said by the Opposition, there have been measurable improvements across the health service,” he stated.