State investment in banks ruled out 'at this time', says Tánaiste

TÁNAISTE MARY Coughlan has ruled out Government investment in the banking sector "at this time", amid concerns that one of the biggest banks in the State was restricting loans.

Fine Gael finance spokesman Richard Bruton said "the country's economic future is very much at stake. Today we heard one of the largest banks will be curtailing its lending".

Mr Bruton pointed out that "almost half of small and medium-sized enterprises are claiming they cannot get borrowing for overdrafts, for term loans or for stocking purposes".

But while Ms Coughlan urged the banks to extend loans and credit from European Investment Bank funding, the Government did not feel State investment "is an appropriate mechanism" at this time.

Mr Bruton said that many economic commentators had expressed pessimism "about the economic leadership we are receiving in this country and questioning once again" whether a supplementary budget would be necessary soon.

The Government "has adopted a wait and see strategy as regards the banks where it will not advance capital to the banks except as a last resort" and he suggested that it was proving "damaging to the economy". He asked if the Government would bring forward legislation "should it be necessary to put State capital into the banks".

Labour finance spokeswoman Joan Burton asked when would the PricewaterhouseCooper's report on the banks' capital position be ready?

The Tánaiste said that "at this time it is not the Government's intention to move towards capitalisation".

She accepted his point about "the issue of access to capital and credit" and urged the banks "to facilitate this with the available funding from the European Investment Bank".

She and Minister for Finance Brian Lenihan "have several engagements with the banks" and Mr Lenihan would be meeting them "once more on this issue".

While State investment "at this time" was an "inappropriate mechanism" the matter "is constantly under review and is discussed by all members of Cabinet".