BANKS:THE IRISH banking sector will be significantly smaller in the future as part of the EU and International Monetary Fund (IMF) rescue package for the State, Taoiseach Brian Cowen said last night.
As Mr Cowen officially confirmed the Government has applied for financial assistance from the bodies, he said the programme agreed would involve a substantial restructuring of the banking sector, as well as severe cutbacks.
“Irish banks will be significantly smaller than they have been in the past,” said Mr Cowen.
“The second key element of the agreement will be a programme to reduce our budget deficit. Put simply, the Government has to increase our taxes and reduce our spending”.
Mr Cowen and Minister for Finance Brian Lenihan told a press conference in Government Buildings last night that the EU and the IMF had agreed to enter negotiations to provide loans to Ireland.
Neither would say how much money was involved but said the figure would be determined at the end of negotiations with the IMF, European Commission and the European Central Bank, a process that would take two weeks.
Mr Lenihan also disclosed that both Britain and Sweden had indicated they stood ready to consider providing loans to Ireland. Both also confirmed that the G7 and the group of finance ministers from the euro zone had also ratified the deal.
He also emphasised that corporation tax would not be affected by the bailout and would not form part of the negotiations.
He said that income taxes would rise to 2006 levels when the four-year programme had been implemented adding that was in the interest of all citizens, regardless of political persuasion, to ensure the austerity measures were passed.
“We should not underestimate the scale of our economic problems. We must have the faith in our ability as a people to recover and to prosper once more,” said Mr Cowen.
Asked about the size of the loan, Mr Lenihan said that it would be less than €100 billion but refused to be more specific. He also agreed that the programme drawn up as part of the deal for external assistance would likely last for three years.
Asked whether he took responsibility and would he be prepared to resign as a result of the State having to take a bailout, Mr Cowen said he had always taken responsibility for his actions and had taken action quickly – “from the very moment it appeared there was a budgetary problem”. In relation to the question of Ireland relinquishing sovereignty, Mr Lenihan said that Ireland’s option had been “narrowly circumscribed” since 2008 when there was a banking collapse and construction collapse.
“It is essential that we maintain economic continuity, that everyone understands that ATM machines function, that salaries are paid . . . that a large number of overseas investors continue to invest in enterprise.”
Asked whether the deal compromised sovereignty, Mr Cowen said a small open economy like Ireland did not have the luxury of taking decisions without reference to the wider world.
He said new arrangements were in place affecting all euro zone countries. “They would apply even if we were not in the process of [seeking financial assistance],” he said.
Mr Cowen denied his party or the people had lost faith in him and also confirmed it was his intention to lead Fianna Fáil into the next election.