IRELAND'S DILEMMA - Brian Cowen's "hoarse" performance in a radio interview has led to calls for the Irish prime minister's resignation. But this is the least of his mistakes, or the country's problems. It would be better if Irish deputies focused less on his alleged tipsiness, and more on his misguided strategy for dealing with the country's banking sector, writes the Financial Times in an editoral piece today. Confidence in Ireland's creditworthiness has slumped. At a debt auction on Tuesday, Ireland was forced to pay more than 5% for four year bonds - about what it would pay were it to access the European Financial Stability Facility. Weakening growth has pushed the country off-track in its fiscal consolidation, leading the central bank governor, Patrick Honohan, to call for further cuts in public expenditure lest Ireland misses its deficit reduction target. The Irish public has already taken plenty of pain in the form of spending and wage cuts. Before asking for more, Mr Cowen should change a perverse policy that pushes up interest rates and crimps growth. Ireland was not highly indebted before the crisis, with sovereign borrowings of just 25 per cent of GDP. Private sector analysts now fear that gross public debt may reach up to 136 per cent in 2014, once Dublin's guarantees and estimated losses are added to its sovereign borrowings. Much of this reflects the state's acceptance of open-ended exposure to private liabilities across the banking sector - a policy that unnerves markets and jacks up sovereign rates.
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AIB CLOSE TO SECURING DEAL TO OFFLOAD US STAKE - Speculation that AIB is close to securing a deal to offload its stake in American bank M&T by the end of the month intensified yesterday, with some sources suggesting that the bank could net in excess of the expected price for the asset, says the Irish Times. Reports yesterday suggested that M&T may cede a majority stake in the bank to Santander, by merging with the Spanish bank's US retail bank, Sovereign. Sovereign, which has posted pretax losses for the past three years, would come under the management of M&T. Such a merger would mean that the new entity would become the ninth-largest savings institution in the US by deposits. AIB declined to comment on the status of the proposed sale. Analysts estimate the sale would generate more than €1.1 billion (€820 million) for the bank, based on M&T's share price. The stock, which has been trading at an average of $85 over the last few months, hit $95 at one stage on Monday before falling back to $91. If the sale were to exceed estimates, it would have implications for the bank's planned rights issue and the sale of its UK businesses, analysts said yesterday.
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ANY ANGLO DEFAULT WOULD HAVE TO BE DEALT WITH IN ENGLISH COURTS - Any future default on bonds at Anglo Irish Bank would have to be adjudicated upon in the English courts and not in Ireland, the Irish Independent has confirmed. The Government is not planning to default on any Anglo bonds, but the idea has been floated by third-level academics and some opposition politicians in recent weeks. Instead of defaulting, the Government is expected to give the bank the go-ahead to do a bond buyback with some classes of bondholders - but who precisely is not yet clear. Bonds issued by Anglo over recent years are covered by English law, so if bondholders were to take legal action they would petition the English courts. English law treats the rights of bondholders differently to Ireland. In recent cases in England between issuers and bondholders, the courts have ordered the issuer not only to pay missed coupons (interest payments), but also the legal costs incurred in taking the action in the first place.
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HSBC CHIEF EXECUTIVE THREATENS TO QUIT - HSBC is facing a boardroom succession row after the bank's chief executive, Michael Geoghegan, reportedly threatened to resign if he is not promoted to chairman, writes the Guardian. HSBC is expected to select a replacement for Stephen Green, who is moving into government as trade minister at a board meeting next Tuesday. However, reports suggest that the bank is set to abandon its tradition of promoting chief executives to the chairman role - prompting Geoghegan's ire. "He was told the board was not ready to give him the chairmanship and he was not happy," a source familiar with the bank's succession planning said. HSBC declined to comment. The incumbent chief executive is said to be particularly unhappy at the prospect of Green being replaced by John Thornton, a former Goldman Sachs banker. Other names in the running include Douglas Flint, HSBC's finance director, and Simon Robertson, the non-executive leading the succession process, who would probably have to resign as chairman of Rolls-Royce in order to take over at HSBC.
