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Colm McCarthy: Irish bank debt was incurred "under threats" from ECB

The UCD economist said that no other eurozone country has taken on the kind of bank-related debt that Ireland took on – and warned that it may not be sustainable.

Image: Niall Carson/PA Wire

UCD ECONOMIST COLM McCarthy has said that Ireland’s multi-billion bank debt burden was taken on by the State “under threats” from the European Central Bank.

McCarthy also warned that no other eurozone member took on the kind of bank-related debt that Ireland took on – and that Irish taxpayers and bondholders are bearing the brunt of the repayments.

In the Sunday Independent today, the economist behind the Bord Snip Nua report said that the ECB needs to recognise the significant difference between debt accumulated in the normal course of events by countries and debt incurred from taking on the burden of the banks.

“Commissioner [Oli] Rehn and his colleagues in the Commission effect not to understand that not all debts are created equal,” McCarthy wrote today.

“There are objections to at least a portion of the bank-related debt now carried on the books of the Irish Exchequer that are in the nature of moral or ethical objections, arising from the circumstances in which the debts were created”.

He said that part of the Irish debt was incurred “under duress and inappropriately, under threats from the European Central Bank”.

“The losers are not just Irish taxpayers. Traditional holders of Irish sovereign debt have also been disadvantaged, queue-jumped by unguaranteed bondholders in private banks, which have already been closed down,” said McCarthy.

“No other eurozone member has incurred bank-related debt under ECB duress”

He added:

There are no provisions in the Maastricht Treaty, in the Stability and Growth Pact or in any other pact or international treaty which grant this power to the ECB, nor was any eurozone member state ever asked to acccede to such an arrangement.

The government is due to make a €3.1 billion payment towards the Anglo promissory notes at the end of this month.

Noonan says Irish economy could “take off like a rocket” >

Ross doubts if deal on promissory notes will be done before 31 March >

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