Lenihan says Government may accept aid package
Minister for Finance Brian Lenihan said today the Government could accept an aid package for the banks after talks in Dublin with the European Union and International Monetary Fund.
Speaking during a Dáil debate on the negotiations this morning, Mr Lenihan said the establishment of a contingency fund would be a "very desirable outcome" but insisted no final decisions had been made. He said it was possible that the funds would be made available "but not drawn down”.
Mr Lenihan also denied claims the Government had been keeping the electorate in the dark over the extent of the negotiations.
Separately, Taoiseach Brian Cowen rejected suggestions Ireland was surrendering its sovereignty. “There is no question of loss of sovereignty for Ireland,” he said.
An IMF mission is currently en route to Dublin and plans to begin work tomorrow morning, an IMF spokeswoman confirmed this afternoon. Mission chief Ajai Chopra is already in the Dublin, and the rest of the team - likely to number 10 to 12, including banking experts - was on its way, spokeswoman Caroline Atkinson said at a press briefing.
She repeatedly declined to comment on "hypothetical" questions about how much aid Ireland might need or how a package could be structured. The IMF has not received a request for financial support, she said.
This morning, Central Bank governor Patrick Honohan said he expected the Government will have to accept a "very substantial" loan, amounting to tens of billions of euro.
"It's my expectation that that is what is definitely likely to happen. That's why the large technical teams are sitting down discussing these matters," he told RTÉ's Morning Ireland. "I think this is the way forward. Market conditions have not allowed us to go ahead without seeking the support of our international collaborators.”
Prof Honohan, who was in Frankfurt for a meeting of the European Central Bank governing council, said it would be a loan, which had to be repaid, rather than a bailout. He said such a large loan was required “to show Ireland has sufficient firepower to deal with any concerns of the market”. He also understood the money would be borrowed at a rate in the region of 5 per cent.
In the Dáil, Mr Lenihan denied the Government had kept the public in the dark over the talks. “If the Government has been reticent in making public comment, it has been in the interests of protecting the taxpayer,” he said. “Jumping to conclusions ahead of all of the facts is not to the benefit of the taxpayer. Nor is it in our interests in advance of discussions that are now taking place.
"It is the Government’s job to assess the options in light of the facts and the facts can best be established after having the short and focussed discussion. That is what the people would expect.”
Mr Lenihan also repeatedly emphasised that bank “deposits are safe”, and would not be affected by the discussions.
Speaking this evening, Mr Lenihan said the State’s 12.5 per cent corporation tax rate was an “absolute red line” issue.
“I have always made it clear, at all international organisations, including some of the organisations that are involved in the present discussions and talks that that is a red line. And many of them agree with me because we will not have economic recovery if we do not sustain our strong, international export-focused drive. That’s what we need to continue to do and we have to retain the economic policy instruments that allow us to do that.”
Mr Lenihan also admitted that external assistance was needed to stabilise the banking system.
As pressure builds from Europe for an immediate application for external aid, the Government is campaigning to minimise any funding it draws down in a bid to ensure the terms are not too onerous.
It is also expected to battle to prevent any increase in the €6 billion adjustment proposed for the 2011 budget and the €15 billion target in the four-year plan.
French economy minister Christine Lagarde this morning said the euro zone was not at risk of breaking up in spite of jitters over the creditworthiness of Ireland. "No, there is no risk of [the EU] breaking up," she said on France Inter radio. Ms Lagarde added Britain could participate in aid for Ireland despite not being a member of the euro zone, possibly in the form of a bilateral loan.
British chancellor George Osborne yesterday declared his government’s readiness to assist in any rescue scheme for Ireland.