THE GOVERNOR OF the Central Bank’s call for the direct recapitalisation of the banks has been welcomed by Sinn Féin but the party said that it had come €64 billion too late.
Patrick Honohan, who is also a member of the European Central Bank’s governing council, told an audience in London last night that recapitalising banks from EU bailout funds, such as the European Financial Stability Fund, rather then lending directly to countries would reduce the level of national debt in those countries.
Offering it as an alternative in the ongoing debt crisis, Honohan noted that the €17 billion that had been injected into Ireland’s banks last year had added some 13 per cent of gross national product (GNP) to the country’s overall debt.
Sinn Fein’s finance spokesperson Pearse Doherty said that the governor’s comments were “welcomed” and were moving closer to his party’s own policy on the banks.
However he said that they had come €64 billion too late for Ireland noting the amount of money that had been pumped into Ireland’s banks since the State-backed guarantee in September 2008.
“Governor Honahan has been in position for a number of years now and during that time approximately €64 billion of taxpayers’ money has been poured into Irish banks by this government and the last – and that’s without mentioning the establishment of the €30 billion NAMA,” he said.
“I imagine Governor Honahan’s comments were prepared long in advance of tonight, but it is striking that on a day when it looks as though Spanish banks need large capital injections, our bank Governor is talking about a Europe wide and not a national government response.
Yesterday, the Spanish government indicated that it will announce its plan for reforms of its troubled banking system this week.
Reuters reported that between €7-10 billion will be pumped into the country’s fourth-biggest lender Bankia SA, which not unlike Irish banks, is burdened with a huge toxic property portfolio.
Doherty added that if Honohan’s comments were taken on board then Ireland should seek to ensure that money used to prop up the banking system is refunded through the European funds.