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Noonan: 'I never promised I'd burn senior bondholders'

Michael Noonan says he would like to share the burden of Anglo with its bondholders, but that the ECB wouldn’t support it.

MICHAEL NOONAN has insisted that Fine Gael had never promised that it would unilaterally burn senior bondholders in Ireland’s banks – although the party is supportive of doing so.

Speaking in the Dáil this afternoon, Noonan said that while he had always felt that the price of repairing the banking sector should be shared with private bondholders, this had never been a pre-election promise of Fine Gael’s.

Instead, he said, he had always added the qualification that the support of the European Central Bank would be required if Ireland was to proceed with any plan which would see its banks opt out of repaying any of their bonds.

Noonan was answering questions on the Irish Bank Resolution Corporation’s decision to honour a $1bn bond issued by Anglo Irish Bank - despite that bond not being covered under the terms of the government’s blanket guarantee.

Noonan told independent TD Stephen Donnelly that while the European Central Bank’s support would be needed if IBRC was to decide to default on that bond, “the ECB’s consent was not forthcoming.”

“Negotiation with European authorities is a lengthy process,” the minister said, adding that it had taken the government five months to secure a cut on the interest rate charged to Ireland’s EU-IMF loans. “It goes inch by inch, and we’re moving it forward inch by inch.”

Donnelly had asked Noonan to elaborate on comments made in the Dáil last week, when Noonan recounted advice given by Brian Lenihan that the EU-IMF programme would be withdrawn if Ireland had decided not to honour the banks’ bonds.

Noonan said he believed this to be the case when Lenihan was in office, but that no similar threat “has been made to me, in all my meetings in Brussels, by anybody. They’ve all been very, very supportive.”

Donnelly accused Noonan of campaigning in the General Election on the basis that the banks would ‘burn’ their bondholders, even in spite of Lenihan’s insistence that doing so would put the EU-IMF deal at risk.

“What you’re doing now is using information from Fianna Fáil, from last November, which you ignored during the election… you’re using that to justify what you’re saying,” he said.

Noonan replied to say that Donnelly was “like other opposition deputies – you always insist on half-quoting me.”

“I never said it was Fine Gael policy, in government, to burn bondholders unilaterally… I campaigned on that basis in opposition, right through election.”

Earlier, Noonan had confirmed to Fianna Fáil’s Michael McGrath that the Financial Regulator had said it did not want powers allowing it to set mortgage interest rates on behalf of retail banks.

The regulator was instead keen “to use the powers he has, along with his powers of persuasion – which are considerable – to affect the interest rate,” Noonan said.

About the author:

Gavan Reilly

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