State can no longer borrow money, claims Noonan
IRELAND CAN no longer borrow on the international markets because its “sovereign creditworthiness is gone”, Fine Gael finance spokesman Michael Noonan has said. He said that “Anglo Irish Bank was supposed to be too big to fail”, but “it was too big to save. That is the real position.”
Mr Noonan warned that “we have almost reached the point of the rescue of Anglo Irish Bank bringing down this country with the Minister being forced this morning to announce the closure of the bond markets.
“The closure of the bond market means the sovereign State is in deep trouble because it cannot borrow money.”
Speaking during the Dáil debate on the total expected exchequer cost of bailing out the banking system, Mr Noonan said the Government’s banking strategy had collapsed.
Mr Noonan described the figures as an “appalling disaster” and said the Government made the “calamitous mistake of guaranteeing all Anglo Irish Bank’s liabilities”. Months after nationalistation, the Minister said the potential liability would not exceed €4.5 billion.
“I accept you were misled and misinformed and so on, but there is a huge gap between €4.5 billion and the €34 billion potential final cost of Anglo,” he told Minister for Finance Brian Lenihan.
Ireland was now “left in the situation of having to cancel next month’s bond auction” because the country does not have creditworthiness any more and could not sell the bonds at an affordable price. That is the bottom line on the banking strategy the Government has pursued for two years.”
Mr Noonan said the Government had done what no government should do and “put the creditworthiness of the sovereign State at risk to rescue a failed bank. The national interest always requires that you protect the creditworthiness of the sovereign. When faced with the choice of the sovereign and a financial institution, you opt for the sovereign.”
The Fine Gael spokesman said the Minister had been badly served by the then Central Bank, financial regulator’s office and expensive advisers.
But at the end of the day, he told Mr Lenihan: “You are the person who holds constitutional obligation for the finances of the State”.
When Mr Lenihan said “the deputy knows well that the reckless lending did not happen on my watch”, Mr Noonan agreed but said: “you’re responsible for the architecture of the banking rescue strategy which is now in broken pieces on the floor”. The Minister rejected the comment as untrue.
Mr Noonan claimed the Government’s strategy of guaranteeing bondholders debt, making the taxpayer the “only agent of rescue”, was a failed strategy because “it has got us to the point of not being able to have a bond auction next month”. The Government “like a losing gambler, is doubling its bet in the vain hope of a win on the last race”.
But he welcomed the increase in the threshold for debts to be transferred to Nama from €5 million to €20 million. That was a “much more reasonable” figure, he said, pointing out that there were 620 people with debts of €5-€20 million, which would not now “crystallise as quickly”.
Fine Gael leader Enda Kenny said it was “catastrophic that the Government has allowed a relatively small number of people to drive this country to the edge of an economic abyss. Nobody has paid the penalty under the law of the land,” but “a man who was unable to pay a fine of €250 was sentenced to 14 days of imprisonment in Mountjoy Prison and will have a criminal record for the rest of his life.”