Irish Government to burn senior bondholders in disgraced banks

Noonan reveals plans to make investors pay for bank losses

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Irish Finance Minister Michael Noonan

Photo by REUTERS

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The Irish government has made the first move to burn bondholders in two failed banks – with the full backing of the International Monetary Fund.

Finance Minister Michael Noonan is preparing plans not to repay more than €3.5 billion worth of debt to investors in Anglo Irish and Irish Nationwide.

The historic move – the first time that a Eurozone bank defaulted on the ‘safe’ investment – faces opposition from the European Central Bank.

But Noonan is determined to press ahead with the radical plan to burn senior bondholders in two of the biggest players in the collapse of the Celtic Tiger economy.

The proposed default would save the Irish taxpayer billions of euros, but news of the plan – and uncertainty in Greece - caused mayhem on international markets.

The euro fell sharply in New York trading in the wake of ECB opposition and concerns from Brussels that such a move would destabilize the European banking system if senior bondholders were burnt.

Acting International Monetary Fund boss John Lipsky has told Minister Noonan that the IMF will back Ireland’s stance after they met in America.

Noonan outlined to Lipsky that Anglo Irish is no longer a real bank and that imposing losses on Anglo bondholders would not ‘trigger contagion’ because it was no longer a real bank.

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Minister Noonan told the Irish Independent: “I said, ‘Look, it’s no longer a bank. Anglo is now merged with Irish Nationwide. It’s a warehouse for impaired assets. It is not a real bank.

“You can’t put your money on deposit. You can’t get a loan from Anglo Irish.

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