Ireland’s Minister for Finance, Brian Lenihan, has told the Irish Government that a contingency fund from the International Monetary Fund and the European Union would be a “very desirable outcome”.
However, he added that he did not believe that were at that point yet.
On Thursday afternoon, in parliament, he admitted that Ireland would be borrowing money at rates above those available from the European Central Bank (ECB) as part of gaining access to the fund.
Pat Rabbitte, of the Labour Party, asked him to confirm that “a chunk of any money on loan would go into the banks after being borrowed by the State at a rate that would be higher than the current 1.5% from the ECB.'
Lenihan said that was correct it was an important issue in the discussions. He said he did not believe it would be main focus to “the State into a Central Bank which would lend at 4 or 5% at its own cost”.
He said the focus of the discussions would be providing capital and a contingency capital fund that can be a back-up to the banks.
The Minister admitted that although the Government does not require authority to borrow money but that “this was a more unusual circumstance.”
After days of questions over the silence surrounding the Government, over the meeting with the European partners and IMF, Lenihan said that it had been done to protect the taxpayers. The problems in that they are dealing with have nothing to do wit budgetary matter and have to do with a structural nature in the banking sector.
He said the IMF, ECB and European Commission were in meeting with the Government to look at who kind of financial package would be taken and he emphasized that there was no question of the tax payer having an unspecified burden.
Speaking about the bank guarantee scheme, he said that the governor had defended it and that European finance ministers agree that it was the correct course of action at the time. He also looked to reassure the public that all bank deposits are “safe and secure”.
Mary Hanafin, Ireland’s Minister for Tourism, Culture and Sport that the talks could be completed before the Budget. Speaking to Ireland’s national broadcaster, RTE, she said the Government is aiming to protect the taxpayer but the resolution would not be at any cost.
Michael Noonan, Fine Gael's Finance Spokesman described the Government's banking strategy as 'disastrous'. He called the Government an embarrassment to the Irish people and highlighted the fact that Governor of the Central Bank felt the onus to come out and explain to the Irish people what was happening.
Noonan said that the Irish people now had an answer to the New York Times' editorial question - 'Could a bank bring down a country?'
A spokesperson for the IMF said that talks would begin tomorrow morning.