MINISTER FOR Finance Brian Lenihan insisted last night the economy could cope with the extra burden on the public finances imposed by the Anglo bailout. He said there was no option but to recapitalise the bank, even though it would increase the national debt over time.
"We are in danger of viewing Ireland as having a problem we cannot surmount, but that is not the case. Those advocating default would put us in the position of Iceland or Argentina and that would leave us with insurmountable problems," he told The Irish Times.
“People are perfectly entitled to be angry at the reckless lending of the bankers. I understand that, but Ireland is not Argentina and we can’t go around repudiating our debts,” he added. He said the cost of dealing with Anglo would be “averaged over a number of years and while the borrowing cost will be substantial, it is a sustainable cost”.
Many people might not appreciate that the banks and the State are funded by the same kind of international institutions and the State was even more dependent on them than the banks, the Minister added.
“The markets are saying that this is a credible plan, just as the action we took in December demonstrated that we are in charge of our public finances.”
He said the recapitalisation announcement should take the National Asset Management Agency (Nama) off the political agenda once and for all. “Nama has proved its virility and the Nama management have got off to a flying start,” he said.
The Minister acknowledged the scale of the banking crisis “has been a huge pressure on me since 2008, knowing the fragility of the system”.
He rejected suggestions that on the night of September 29th/30th, 2008, when the Government decided to guarantee the banks, that it had contact with Seán FitzPatrick of Anglo Irish Bank or Michael Fingleton of Irish Nationwide.
On that night, the only senior figures from the banking sector in contact with the Government were from AIB and Bank of Ireland, he said.
Mr Lenihan said that one of the problems he had to deal with all along was that the banks had constantly sought to minimise their losses. “If the banks were left to their own devices, they would have put their private interests ahead of the need to support the economy. If the banking system is not in a position to support economic recovery, it won’t happen,” he said.
Separately, informed sources said Nama figures found it “incredulous” that Anglo expected it to apply a discount of 28 per cent on the first loans to be bought from the bank when the Government estimated last year that the average discount for all institutions would be 30 per cent. It is understood that Nama had given no indication to any of the five participating financial institutions what discount would be applied to their loans in advance of them being valued.
Earlier in the Dáil, the Minister responded to a query by Sinn Féin’s Caoimhghín Ó Caoláin about the role of accountancy firm Ernst & Young in auditing the Anglo accounts in 2009 by saying that the banking inquiry would look into the matter, as would Nama.