MINISTER FOR Finance Brian Lenihan will meet EU competition commissioner Joaquin Almunia in Brussels early next week as the Government presses for a swift decision on the €25 billion rescue of Anglo Irish Bank.
The talks come as the commission’s review of the controversial plan to divide Anglo into “good” and “bad” banks nears its final phase, and amid concern in the EU executive about the rapid escalation in the cost of propping up the nationalised lender.
Yesterday credit default swaps related to Anglo’s senior debt jumped to the highest level since July 2009.
The cost of insuring against default on Anglo Irish bonds for five years rose 54.5 basis points to 687, the biggest one-day increase in a year.
The massive jump in insuring against default by Anglo came as separate figures showed that the credit default swaps on European corporate bonds, including bank bonds, are declining.
The increase came as the bank announced it would not make an optional interest payment due on October 5th on £300 million of subordinated notes. The decision not to repay the interest on the upper tier-two debt was not unexpected due to European Commission rules on state aid which prohibits government-supported banks from paying interest payments on certain classes of debt.
Meanwhile, Taoiseach Brian Cowen yesterday reiterated the Government’s opposition to shutting the bank, saying an immediate wind-up of Anglo Irish Bank would cost the Irish taxpayer €70 billion or more.
Speaking in Offaly, Mr Cowen said discussions with the European Commission about the future of Anglo were at an advanced stage, and the Government was anxious to bring the issue to finality as soon as those discussions were completed.
Mr Lenihan’s meeting with Mr Almunia is likely to take place on Monday as ministers gather in Brussels for two days of scheduled talks on the financial crisis.
Officials in the commission have been examining a revised restructuring plan for Anglo since the end of May, an intricate process which follows their dismissal in March of the first version of the plan.
As the review continues, officials in Brussels are testing in detail the assumptions in the Government’s analysis – reiterated by Mr Cowen yesterday – that keeping the bank open represents the option with the lowest cost for Irish taxpayers.
Although Dublin expects a ruling this month, Mr Almunia is yet to reach a decision in principle on the current proposal for Anglo and has not started the process of consulting with his fellow commissioners on the bank’s plan.
The review still has some way to go so a final decision is not imminent, it is understood. However, Brussels officials say they are conscious of the need to bring the matter to a conclusion quickly as uncertainty about the rising cost of the bailout has undermined market confidence in Irish debt and the State’s economic plan.
Mr Almunia’s spokeswoman said: “A meeting is indeed being arranged, which is not surprising given that the Minister will be in Brussels for the regular meeting of the EU finance ministers. There will be no statement on our part.”
A high-level official in Belgium’s rotating presidency of the EU said there would be no discussion about the Anglo rescue or Ireland’s economic position at the monthly meeting of the 27 EU finance ministers on Tuesday.
Separately, two new covered bonds issued by Anglo yesterday, relating to mortgage loans backed by commercial real estate in the UK, were given an ‘AAA’ rating by Fitch. The credit ratings agency said Anglo has a “limited default risk” while it is owned by the State.
