Labour has not reneged on promises - HowlinFriday 01 April 2011 21.56
Minister for Public Expenditure and Reform Brendan Howlin has rejected suggestions that the Labour Party reneged on its election promises by not getting senior bondholders in the banks to share the debt burden.
Meanwhile, ratings agency Standard & Poor's has cut the country's debt rating, in a move which had been expected.
It follows the announcement yesterday that €24bn of fresh capital is required by the Irish banks, which are to be restructured.
It brings the total cost to the taxpayer of fixing the country's banking sector to more than €70bn.
Mr Howlin said the Government had chosen the best possible path out of a ruinous situation and it would not have been worth it to burn the bondholders.
There were big moves in Irish banking shares in Dublin today after yesterday's announcements.
Shares in Bank of Ireland and AIB gained after the decision that the two banks would form the core of the Irish retail banking industry in the years ahead.
But shares in Irish Life & Permanent closed down almost 60% at €0.17 following the news that it will be forced to sell its profitable Irish Life business.
Bank of Ireland ended up more than 40% at €0.31, while AIB gained more than 10% to €0.21.
Overall the ISEQ is up 1.5%, with Bank of Ireland the most traded share.
But the results of the stress tests appear to have had little impact on the cost of issuing government debt, with bond yields remaining above 10%.
Noonan on stress tests
Meanwhile, Minister for Finance Michael Noonan has said the European Central Bank's commitment to continue lending to Irish banks was a vote of confidence.
He said it had been Fine Gael policy that bondholders should share the debt burden, but that the European Central Bank in Frankfurt would not agree.
Speaking on RTÉ's Morning Ireland, he said the stress tests had also been more severe than they needed to be in order to restore credibility to the banks.
Economist Colm McCarthy has said that the Government had inherited a very difficult situation and what it had undertaken with the Central Bank was a 'holding operation'.
He said the country has been drained of liquidity and the banks could not borrow in the market.
The crisis had been caused by the perception that neither the banks nor the Government were solvent in the long term, he added.
'Very thorough' measures
A senior official from the European Investment Bank has said that the measures announced by the Government yesterday are 'very thorough' and will do a lot to renew international confidence in the Irish banking system.
Plutarchos Sakellaris, Vice President of the EIB responsible for Ireland, said it is important that the Irish Government met its obligation to carry out a stress test of banks here.
A delegation from the investment bank is in Ireland to meet the new Minister for Finance and others in order to match its lending programme to national development priorities.
Mr Sakellaris said his meeting with the Governor of the Central Bank this morning would be 'interesting'.
He said that the EIB is committed to Ireland during its 'economic crisis' and would continue to lend funds via banks here for the development of small and medium-sized enterprises and infrastructural projects.
The delegation from the EIB met Mr Noonan yesterday and said that the minister had stressed the importance the Government was attaching to investments in schools.
Meanwhile, the Secretary General of the European Commission has said the Government's bailout and restructuring package marks a turning point for Ireland.
Catherine Day said the amount of money needed is enormous but it is within what they provided for.
Now that there is clarity and restructuring, banks can begin responsible lending again, she added.
International markets should have confidence in the plan because the Irish banks have been subjected to the most rigorous stress testing and the Government has taken decisions based on those stress tests, she explained.
In relation to burden sharing, Ms Day said the issue is about credibility and if you borrow money you should pay it back.
She said the commission believes this can be done and that will keep up Ireland's reputation internationally.