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Dublin: 16°C Friday 19 August 2022

IMF and ECB divided on whether Ireland should burn bondholders

The IMF says burden-sharing is an option, but the ECB says it’s worried that doing so cause panic to “spill over” to Europe.

The ECB's Klaus Masuch, the EC's Istvan Szekely and the IMF's Craig Beaumont, in Dublin today.
The ECB's Klaus Masuch, the EC's Istvan Szekely and the IMF's Craig Beaumont, in Dublin today.
Image: Laura Hutton/Photocall Ireland

THE EUROPEAN CENTRAL BANK and the International Monetary Fund have expressed differences over whether Ireland can further reduce the cost of saving its banking system by imposing further losses on bondholders.

Speaking at a press conference in Dublin today the IMF’s mission director to Ireland, Craig Beaumont, said the IMF had no objection to Ireland enforcing losses on the senior unsecured bondholders of its banks.

The European Central Bank, however, expressed reservations about the move – conceding that while the terms of the EU-IMF deal did not require Ireland to repay all bonds, doing so could cause financial panic to “spill over” to other countries.

Asked about how it would respond to any request to share the burden with bondholders, the ECB’s representative Klaus Masuch pointed to the current cost of borrowing for the Irish government – and how it compared to the similar costs for Portugal and Greece.

The comments came a day after Michael Noonan had told an audience of German bankers that Ireland would not require “private sector involvement” in meeting the costs of saving the banking sector.

The Troika’s press conference also saw Masuch, Beaumont and the European Commission’s Istvan Szekely pare back some of the optimism shared by the Irish government about reinvesting the cash from state assets.

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While Noonan and Howlin said the Troika were now willing to allow Ireland reinvest the proceeds into job creation, the Troika said it was still waiting for a formal plan on the sale of assets before it could discuss how the proceeds would be spent.

Szekely said he would encourage the Irish authorities to be “ambitious”, but was not prepared to comment any further until a formal plan for selling some assets was drawn up.

Szekely added that the sale of the assets – which are thought to include Coillte and the Dublin Airport Authority – was a long process, and that Ireland should hold off on any sales until it could command a fair price.

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About the author:

Gavan Reilly

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