Martin tackles Government on burning bondholders

FIANNA FÁIL has challenged the Government’s approach to senior bondholders, highlighting differences between a Fine Gael document “pledging” bondholders may have to be burned, with comments by a Minister of State that it would be “crazy” to do so.

Taoiseach Enda Kenny said it would be “grossly unfair” to expect Irish taxpayers to “fork out 100 per cent for reckless banking”.

Fianna Fáil leader Micheál Martin said during the first Leaders’ Questions of the new Dáil that there had been much commentary during the election about “burning the bondholders”.

He said that in Fine Gael’s “Credit Where Credit Is Due” election document, “there was a pledge in essence that that may have to happen”.

In the document Fine Gael suggested ways the EU-IMF bailout could be changed so that taxpayers did not have to pay the full cost of banking losses. It also said that if the EU had turned away from burning bondholders it should invest in the banks to recapitalise them or else establish “agreed, harmonised procedures to restructure the debts of banks that have become insolvent”.

Mr Martin also referred to comments by Minister of State Brian Hayes that such a move would be “crazy” and asked if the Taoiseach agreed.

Mr Kenny said “there should be no further monies put into banks beyond what’s already committed until we see how that responsibility is to be shared”.

He said that “irrespective of changed views from Europe, it is grossly unfair to expect the Irish taxpayer to fork out 100 per cent for the cause of reckless banking”. He told Mr Martin that that recklessness “culminated in an agreement by your own government which has brought this about”.

He added that “hopefully by Friday week we will be in a much clearer position” with the work on “the stress tests of the bank, to have some greater clarity as to what the true level of indebtedness is”.

Earlier Mr Kenny told Mr Martin it was “heartening” to hear the Fianna Fáil leader support the Taoiseach’s rejection of a lower interest on the EU-IMF deal for an increase in Ireland’s corporation tax rate.

The Fianna Fáil leader, who described the EU move as a “fantastic try-on”, had highlighted that the rate could not be changed because the electorate had confirmed it in a referendum. Mr Martin said his government negotiated “a protocol to be attached to the second Lisbon referendum proposal” about the tax rate “which was put to the people”.

He said Europe was “left in no doubt about how sincerely and deeply held this view was among the Irish people.” He said it was unfortunate that the corporation tax rate and the EU-IMF loan interest rate had been “conjoined”. And he called on the Taoiseach to “remind President Sarkozy and Chancellor Merkel of that”.

Mr Kenny said it “may have been a classic try-on but the point was made perfectly clear at the meeting in Brussels that these issues are separate issues”.

He insisted that every action the Government would take would be focused on “retrieving our sovereignty” and being able to borrow again from the bond markets.

The Taoiseach said the EU had decided that countries involved in the European Financial Stability Facility (EFSF) “would have interest rate reductions brought about. Ireland is the only country in that package. Greece achieved a reduction of 1 per cent while they’re not a member of that package and their situation is of particular difficulty”.

He said “our whole focus is to achieve a flexibility which will bring about an easing of this position for the Irish taxpayer”.