SIPTU PRESIDENT Jack O'Connor said yesterday that the Government should recapitalise the banks either through borrowing, the use of the National Pension Reserve Fund or a bond issue that the public could subscribe to, writes MARTIN WALL, Industry Correspondent.

Mr O'Connor supported moves to address the banking crisis, but said this "must be properly structured and not left to the mercy of asset strippers and hedge funds".

"I welcome moves to address the banking crisis and indications in the media that there is a financial stimulus package in preparation, including concepts such as the incentivising of research and development investment. This is an indication of an emphasis on medium to longer-term strategic thinking that has been sadly absent over the last 10 years of reliance on unfettered free market madness.

"However, the suggestion that private equity capital would be relied upon to recapitalise the Irish banks is deeply concerning, especially given the lessons of Eircom. This would contradict indications of the emergence of more sustainable long-term thinking."

Mr O'Connor said the State could not afford to rely on speculators, asset strippers and "get rich quick merchants" to develop the strategic infrastructure of our economy.

"Mistakes were made in this regard in the past and everyone in Ireland will be paying for those mistakes for quite some time. But to fail to learn the lessons of it would be unforgivable," he said.

Mr O'Connor said good decisions had been made in recent years as well, such as the lowering of the debt/GDP ratios and the establishment of the National Pensions Reserve Fund.

"These should be relied upon to facilitate a proper recapitalisation of our financial system, either directly or through supporting a Government bond issue, which would allow the interests of the Irish people to be asserted.

"This would allow for the early correction of other mistakes like increasing the tax burden on middle to low income families, and raising VAT rates; thus providing the basis for a financial stimulus package. The recapitalised Irish banking system could then play its role to greatest effect."

Meanwhile,the Irish Bank Officials' Association (IBOA) urged the Government to make a public statement clarifying its future plans for the banking sector.

General secretary Larry Broderick said the information deficit would not bring stability to the banking industry.