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ECB concerned over Ireland's bailout deal and credit bill

Banking body says it is seriously concerned about the new emergency financial legislation passed by the Dáil last week.

In this June 10, 2010 photo, President of the European Central Bank (ECB) Jean-Claude Trichet is shown in Frankfurt.
In this June 10, 2010 photo, President of the European Central Bank (ECB) Jean-Claude Trichet is shown in Frankfurt.
Image: Martin Oeser/AP/Press Association Images

THE ECB IS CONCERNED that the bailout package to Ireland could affect its ability to provide further support to eurozone members, the Financial Times reports.

The banking body has already spent €72m buying European government bonds since May.

Although the bank doesn’t release a breakdown of what proportion has been spent on which country’s bonds, a large portion of that total is expected to have been gone towards Irish bonds, according to the FT.

Last week, Moody’s downgraded Ireland’s government debt by five notches.

The ECB has “serious concerns” about the scope of the Credit Institutions (Stabilisation) Bill introduced to and passed by the Dáil last week. The bank is worried that it could step on the ECB’s own rights over the collateral given as security for a bailout.

In a paper outlining the bank’s opinion on the “emergency stabilisation of credit institutions”, the ECB says:

In particular, the ECB has serious concerns that the draft law is insufficiently legally certain on a number of critical issues for the Eurosystem.

The ECB says while it welcomes Minister Lenihan’s request for the ECB to comment on the draft, it would “have appreciated being consulted by the authority preparing the draft legislation at an earlier stage”. It says it has been unable to assess all the issues the legislation “undoubtedly raises” due to the time constraint.

The paper also says that proposals in the draft law to continue the reorganisations and restoration of Anglo Irish Bank and possibly Irish Nationwide Building Society “appears to go beyond the position agreed with the IMF and the European Commission in liaison with the ECB, which envisaged a specific resolution plan for these two non viable banks”.

The ECB would welcome an amendment to the recital and confirmation that any action taken by the Minister under the draft law with respect to Anglo and INBS will be conditional on agreement by the IMF and the European Commission, in consultation with the ECB, and will relate to the State’s commitments under the agreement reached with the IMF and the European Commission, in liaison with the ECB.

President Mary McAleese has yet to decide if she will refer the bill to the Supreme Court to test its constitutionality, and has  called a  Council of State meeting for tomorrow to discuss the issue.

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