Deposit guarantee draws mixed reaction

 

The announcement from the Government this morning that a guarantee will apply on all Irish bank deposits has drawn mixed reaction from Opposition parties and trade unions.

The Government this morning placed an unlimited two-year guarantee on all deposits and certain debt in six Irish banks in a move designed to “safeguard the Irish financial system”.

Commenting on the developments this morning, Fine Gael leader Enda Kenny said: “Fine Gael has always said that it would support necessary measures to safeguard Ireland’s economic future. The move this morning by the Government to guarantee the deposits of Irish banks is, I believe, one such measure.

"Our welcome is a guarded one, however, as there are still many details that must be provided to the public and questions that must be answered surrounding the new arrangement."

Fine Gael finance spokesman Richard Bruton said the basis upon which charge will be calculated was "an important question that needs to be answered in the course of the day" but he said the Government, in his view, had to make the move it made this morning.

Labour leader Eamon Gilmore said the Taoiseach had to come to the Dáil today "to account for the extraordinary action" taken by the Government this morning.

"The Government has effectively written the biggest blank cheque in history, exposing the Irish taxpayer to enormous liabilities. Estimates of the potential exposure vary between two and three times Irish GNP, perhaps as much as €500bn.

"This move will also have very serious consequences for the Irish debt level and the cost of borrowing for this country. This may in turn have implications for the maintenance of key public services," Mr Gilmore said.

Labour spokeswoman on finance Joan Burton said: "The speed with which the Government has moved to rescue the banking sector is in stark contrast to the blanket refusal to assist other sectors of the Irish economy that have been in trouble and in particular to their total indifference to the plight of the 70,000 workers who have lost their jobs in the last year alone."

Green Party finance spokesman Senator Dan Boyle said the move was a "necessary confidence-giving measure".

"This is not a bailout of Irish banks. It will, in fact, be beneficial to Irish banking customers. The scheme will result in less cost, and be of more advantage to the consumer than the State having to step in to rescue a failed bank – as has happened in the US, the UK, and elsewhere in Europe," he said.

"A great deal of detail will need to be examined in the legislation that will accompany this proposal, but the Green Party is satisfied that the correct approach is being taken.

Sinn Féin welcomed the government’s decision to guarantee deposits, but the party called on the Minister for Finance to outline what quid pro quo he has secured from the banking sector.

“Maintaining international confidence in the Irish banking system is a priority however today must be a line in the sand of reckless practices in the Irish financial sector and a new day of responsible banking must begin," said Sinn Féin finance spokesman Arthur Morgan.

Siptu president Jack O’Connor said the move by Mr Lenihan "essentially represents an exercise in shoring up the pyramid" but added that the "gilt edged guarantee" will build confidence.

"However, there is an aspect of this that is particularly objectionable to ordinary people. It entails guarantees to those who have insisted for years on a ruthless free market for everyone else but are not able to play by the same rules themselves," Mr O'Connor said.

The business community broadly welcomed today's announcement, with employers' group Ibec saying it would help remove uncertainty.

“The banking sector is vital to the effective functioning of business and the economy generally, and the measures announced today should have a positive impact on the ability of businesses to acquire finance and continue normal investment activities. Government has shown sound leadership in the manner in which it has addressed this challenging situation,” said Ibec director general Turlough O’Sullivan.

The Irish Banking Federation, which represents over 70 financial institutions also welcomed today's announcement.

"The Government decision to provide a guarantee arrangement to safeguard deposits in the banking system here, together with the decision to raise the threshold of the Deposit Guarantee Scheme, means that customers of all deposit-taking institutions operating in the State can rest assured that their deposits are secure and that they enjoy the highest levels of protection," it said.