(Reuters) - Ireland's main opposition party warned on Friday that it could unilaterally restructure bank debt if it wins power this month, unless the burden on the country from an EU/IMF bailout is eased.
"If the burden of the debt on Ireland is not reduced ... then the position in Ireland going forward gets very sticky, and we are simply pointing that out in a totally unthreatening way to our European colleagues," Noonan, a likely future finance minister, told reporters.
Noonan said any change to the bailout would have to be agreed with European Union partners.
"It can't be bilateral, we have said that several times."
But the centre-right party took a harder line in its policy document on banking, warning that if some of its proposals were not available then it could unilaterally impose losses on unguaranteed senior bonds, estimated at around 15 billion euros.
"Should some credible combination of these options prove not to be available from Europe, the next Irish government would -- in order to restore its own credit worthiness -- be left with little choice but to unilaterally restructure some of the private debts of those Irish banks in greatest need of recapitalisation," the party said.
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As part of its banking plan, Fine Gael wants to be allowed to impose losses on senior bondholders not covered by an Irish government guarantee but the ECB is opposed to such a move for fear of contagion risk.
Fine Gael wants to avoid a fire-sale of some Irish banking assets, which have to be sold as part of the EU/International Monetary Fund deal, and is looking instead to transfer some of these assets to a special purpose vehicle, possibly funded by the EU buying long-term bonds.
To wean Irish banks off their dependence on ECB funding, Fine Gael is also looking at possibly securing funding from the U.S. Federal Reserve using the dollar assets of Irish banks, estimated at around $50 billion, as security.
"I think ... the significant amount of funding that is needed by the Irish banking sector won't be got from the Federal Reserve," said Gilvarry.
Fine Gael also wants to halt remaining loan transfers from Allied Irish, Bank of Ireland and the EBS Building Society EBSBS.UL to a state-run "bad bank" and instead wants the lenders to hold onto the assets and take loan loss provisions against them.
It added that Anglo Irish and Irish Nationwide should be shut down by the end of the year, a move Anglo's chief executive told Reuters could increase his bank's cost to taxpayers by up to 12 billion euros.
http://uk.reuters.com/article/2011/02/04/uk-ireland-opposition-banks-idUKLDE71318V20110204
Fine Gael, favourites to lead the next coalition government after a February 25 poll, wants Europe to reduce the interest rate it is charging Dublin on its part of an 85 billion euros (£72 billion) assistance package put together to deal with a mounting financial crisis.
Outlining the party's banking strategy, finance spokesman Michael Noonan said there was an opportunity for Ireland to negotiate a fairer deal as part of European efforts to bolster its defences against a year-long debt crisis."If the burden of the debt on Ireland is not reduced ... then the position in Ireland going forward gets very sticky, and we are simply pointing that out in a totally unthreatening way to our European colleagues," Noonan, a likely future finance minister, told reporters.
Noonan said any change to the bailout would have to be agreed with European Union partners.
"It can't be bilateral, we have said that several times."
But the centre-right party took a harder line in its policy document on banking, warning that if some of its proposals were not available then it could unilaterally impose losses on unguaranteed senior bonds, estimated at around 15 billion euros.
"Should some credible combination of these options prove not to be available from Europe, the next Irish government would -- in order to restore its own credit worthiness -- be left with little choice but to unilaterally restructure some of the private debts of those Irish banks in greatest need of recapitalisation," the party said.
Analysts said such rhetoric was about winning votes and in practice Ireland, which relies on European Central Bank funding to keep its banks afloat, could not go it alone.
"Putting anything in place without the support of our major creditor would be extremely difficult for any government. This process will have to be negotiated with Europe," said Oliver Gilvarry, head of research at Dolmen Securities.RATING RISK
As part of its banking plan, Fine Gael wants to be allowed to impose losses on senior bondholders not covered by an Irish government guarantee but the ECB is opposed to such a move for fear of contagion risk.
Fine Gael would also like to negotiate losses with all senior bondholders in state-run lenders Anglo Irish Bank ANGIB.UL and Irish Nationwide IRNBS.UL, which it said are not systemically important.
Credit rating agency Moody's said this week it would downgrade Irish senior bank debt if a new Irish government pursued a hard-line approach with bondholders.
Noonan also wants European support to recapitalise the country's banks and is looking for Europe to potentially take equity or long-term debt investments in its two main lenders, Allied Irish Banks (ALBK.I) and Bank of Ireland (BKIR.I).Fine Gael wants to avoid a fire-sale of some Irish banking assets, which have to be sold as part of the EU/International Monetary Fund deal, and is looking instead to transfer some of these assets to a special purpose vehicle, possibly funded by the EU buying long-term bonds.
To wean Irish banks off their dependence on ECB funding, Fine Gael is also looking at possibly securing funding from the U.S. Federal Reserve using the dollar assets of Irish banks, estimated at around $50 billion, as security.
"I think ... the significant amount of funding that is needed by the Irish banking sector won't be got from the Federal Reserve," said Gilvarry.
Fine Gael also wants to halt remaining loan transfers from Allied Irish, Bank of Ireland and the EBS Building Society EBSBS.UL to a state-run "bad bank" and instead wants the lenders to hold onto the assets and take loan loss provisions against them.
It added that Anglo Irish and Irish Nationwide should be shut down by the end of the year, a move Anglo's chief executive told Reuters could increase his bank's cost to taxpayers by up to 12 billion euros.
http://uk.reuters.com/article/2011/02/04/uk-ireland-opposition-banks-idUKLDE71318V20110204
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