Europe

Home page

Europe

Dublin says aid package might be needed

18 November 2010 04:27 (UTC +04:00)

Baku â€“ APA. Brian Lenihan, Ireland’s finance minister, said it was the "attack" on the euro that had prompted Ireland to seek assistance from the European Union and the International Monetary Fund, APA reports quoting CNN.
In his first comments since the dramatic announcement that an EU-IMF mission was being immediately dispatched to Dublin, Mr Lenihan insisted Ireland’s banks had "no funding difficulties" but said an aid package might be necessary if "further difficulties materialise".
He sought to reassure Irish depositors that their savings remained protected and dismissed opposition claims that he was surrendering Ireland’s economic sovereignty.
"Ireland has been the point of the attack on that currency in recent weeks and it’s important that we build up our defence and ensure that the currency itself is protected. And for that reason, the Irish government will fully engage with this process and work with the mission to ensure that everything possible is done to secure the Irish banking system," Mr Lenihan told Irish radio
He said the Irish government and its EU partners were still examining "options" on what shape a package of financial assistance might take. But he said: "There is no question of loading on to the Irish sovereign and the Irish state some kind of unspecified burden. That’s why the government took great care not to make a formal application at this stage but to engage in intensive discussions to see exactly what the options are."
He said what "may be required may not in fact be an actual transfer of money now, but [a] demonstration of how much money can be made available if further difficulties materialise".
The minister claimed there were "no funding difficulties in the Irish banking system", and pointed to stress testing that had already taken place, along with the removal of much of the toxic debt to the government’s National Asset Management Agency.
He added: "We share our sovereignty with Europe in relation to currency. You have to act with your partners in whatever steps you take. Its not the question of wanting or not wanting [to]. It’s the question of identifying the problem in an urgent way and dealing with it."
Ireland’s banks were hit by extensive property loan losses as the housing and construction bubble burst. As a result of the subsequent recapitalisations, four of the five domestic lenders are set to be state owned, with only Bank of Ireland in the short term likely to remain outside the grasp of state ownership.
Concerns have recently been raised about the deteriorating quality of the bank’s residential mortgage book, with levels of default rising as the economy slows.
In recent months, the banks have become increasingly dependent on funding support from the European Central Bank, accounting for a quarter of all outstanding liquidity provided to the eurozone banking system by the ECB in October.
Mr Lenihan said: "The question of weaning the banks off European Central Bank support is only one of a number of issues that have to be tackled here."