EUROPEAN CENTRAL Bank (ECB) chief Jean-Claude Trichet has said the Irish Government alone is responsible for dealing with the mounting costs of supporting the nationalised Anglo Irish Bank.
As the Coalition faces into a difficult budget estimates process against the backdrop of worsening economic data, Mr Trichet also said Ministers should continue to make “appropriate” moves to stabilise the economy.
He declined to discuss escalating concern that the rising cost of the Anglo bailout, which stands at €25 billion, was creating an intolerable burden on taxpayers and undermining market confidence in the Government’s overall economic plan.
The European Commission is examining a new restructuring plan for Anglo, scrutiny which coincides with a credit rating downgrade on Irish debt by Standard Poor’s and a rise in the State’s borrowing costs.
“If I’m not mistaken it is a bank which is owned by the Government . . . so it’s a responsibility of the Government of Ireland and of the Irish authorities in general to take the appropriate decisions,” Mr Trichet told reporters. “I would say that it is the responsibility of the Irish Government and of the Irish authorities in general to deal with their banks. That is a responsibility that lies very much in Dublin.
“I have confidence that they will manage this difficult issue as well as possible as they did in the past.”
Mr Trichet was speaking as the bank’s governing council extended emergency liquidity measures for banks into 2011 and held its main interest rate at a record low of 1 per cent for the 17th consecutive month.
He offered no comment on an assertion by Irish Central Bank governor Patrick Honohan that Irish borrowing costs were “ridiculous” and declined to say whether he agreed with the assessment from the National Treasury Management Agency that the SP downgrade stemmed from a “flawed” analysis.
It was his practice, he said, not to comment on market movements.
“As regards the overall Irish strategy, I would encourage Ireland to continue to take the appropriate decisions that they took at the very beginning of the crisis with the frontloading decisions that are very important in all domains and of course including in the fiscal domain which remains very important.”
The ECB president’s comments came as the latest exchequer figures showed the Government’s tax revenues continue to fall. The State has collected €18.9 billion in taxes in the first eight months of the year, which compares to €20.8 billion in the same period last year, a drop of 9 per cent. The Department of Finance said the decline had been anticipated in the monthly target for August.
Mr Trichet said a double-dip recession in Europe was not “in the cards” but said risks to the inflation outlook were on the upside. The recovery would continue “at a moderate pace with uncertainty still prevailing”.
The euro traded near its strongest level in a fortnight against the dollar, following the bank’s monthly rate-setting meeting. Given stronger than expected data about the recovery in the euro zone at large, ECB staff raised growth forecasts for the common currency area for this year and next. Nevertheless, the decision to extend emergency lending operations “for as long as necessary” indicates the bank remains in crisis.
The ECB will continue to offer banks unlimited one-week and one-month loans until at least January 18th, extending by three months operations scheduled to unwind next month. The bank also said it will offer three-month refinancing loans in October, November and December at interest rates linked to the average benchmark ECB rate over the lifetime of the loans in question.