MINISTER FOR Finance Brian Lenihan has postponed injecting a further €10 billion into the banks until after the election – missing a key deadline under the EU-IMF bailout.
Speaking last night, Mr Lenihan said the decision was taken with the approval of the EU, the IMF and the European Central Bank (ECB).
However, the IMF said the bailout conditions should be adhered to. It said last night that Ireland had the resources to recapitalise its banks and it was important that the delay was temporary.
The ECB also said that the terms of the EU-IMF deal should be adhered to.
Mr Lenihan said he had received the approval of the Cabinet on the day the Dáil was dissolved to seek to defer the recapitalisation.
“I went to the EU Commission and liaised with the other two institutions and they all agreed to it. The decision would not have been announced without the approval of the three institutions concerned,” he said.
Explaining the decision, Mr Lenihan said the reality was the Government did not have a mandate to make the decision once it lost its Dáil majority. “I am following constitutional practice. It would be different if the Government hadn’t lost its majority,” he said.
Mr Lenihan said it was the Opposition parties which were claiming the deal could be renegotiated, and in those circumstances he did not feel he could proceed. “Obviously if Fine Gael and Labour agree to the recapitalisation, it could go ahead immediately. I am willing to brief them on the matter if they wish,” he added.
In a statement earlier, the Minister said he had informed the European Commission, the IMF and the ECB of the Government’s view that, because of the democratic process, this issue should be addressed by the incoming government.
Fine Gael finance spokesman Michael Noonan said the move seemed “a classic Fianna Fáil political stroke” to avoid announcing bad news in the last week of the election.
Labour Party finance spokeswoman Joan Burton also attacked the decision, saying she hoped Fianna Fáil was not playing some kind of electoral politics.
The EU Commission declined to comment on the Government’s decision to renege on its commitment by the agreed deadline. It said, however, that it expects commitments under the EU-IMF pact will soon be met.
A spokesman for economics commissioner Olli Rehn said the EU expected the delay to be “temporary”, and for the recapitalisation to proceed as agreed.
The IMF also urged the conditions of the bailout be adhered to. “Ireland has the resources to recapitalise its banks and it is important that this delay is temporary and the Irish authorities recapitalise the banks as agreed under the programme,” a US-based IMF spokesman said.
Late last night, the ECB issued a similar statement, demanding the terms of the EU-IMF deal be fulfilled, while in London ECB executive board member Lorenzo Bini Smaghi said the new Irish government would continue to implement the IMF reform plan “because this is in their own interest”.
Mr Lenihan confirmed the next recapitalisation of Bank of Ireland, AIB and EBS building society involved a very large sum, adding this could be subject to “very substantial political misrepresentation” during an election campaign.
The three lenders were due to have been recapitalised to higher international levels by the end of this month under the Government deal with the EU and the IMF. Some €10 billion, to be sourced from the National Pension Reserve Fund, was earmarked for this purpose.
The Minister announced the decision about an hour after the IMF released a report saying all conditions of the deal to the end of December had been met by the Government. The report also said: “The fragile political environment could create unwarranted delays.”
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