Dramatic policy shift would strengthen Ireland’s hand in €64bn negotiations
The Minister for Finance Michael Noonan should clarify reports from an article in The Wall Street Journal online that the ECB President Mario Draghi advocated imposing losses on the senior bondholders of Spanish banks at the meeting of Eurozone Finance Ministers last Monday, 9 July 2012, according to Fianna Fáil Finance Spokesperson Michael McGrath.
Deputy McGrath stated, “These reports, if true, would represent an extraordinary U-turn by the ECB and would greatly strengthen Ireland’s hand in the negotiations surrounding the €64 billion recapitalisation of Irish banks.
“Since the onset of this crisis in 2008 and to this very day, the ECB has insisted that the previous government and the present government repay senior bondholders in full. This insistence resulted in Ireland having to pump €64 billion of new capital into the Irish banks so that property related losses could be absorbed and to protect senior bondholders from incurring any losses whatsoever.
“It is reported on The Wall Street Journal that the Eurozone Finance Ministers rejected the proposal by Mario Draghi that senior bondholders take losses for fear of how the financial markets would react. Minister Michael Noonan represented Ireland at the talks last week and he must now clarify if the ECB outlined a new policy on burning senior bondholders. The Minister must also confirm what position he took, on behalf of the Irish Government, when this new policy position was advocated.
“This change of heart by the ECB is an acknowledgement that it was wrong in Ireland’s case. The relevance of this development for Ireland now is that it greatly improves the context of the negotiations on revisiting the cost of recapitalising our banks. Minister Noonan should make a statement today clarifying exactly what happened at that meeting on July 9th and what the implications are for Ireland.”