Minister for Finance Brian Lenihan has been urged by some senior advisers to allow the country's €24 billion State pension fund to buy Government bonds to support demand, an Irish official said today.
The senior official, who is familiar with financial policy discussions in the Government, stressed that no decision to take such action had been made.
A spokesman for the Department of Finance denied there were any proposals to do this, however.
Tapping the fund, set aside to pay State old-age pensions and pensions for Irish civil servants, could meet stiff political opposition. Roughly €10 billion of it are already earmarked to buy stakes in struggling Irish banks.
But some officials now believe a change in the law covering the fund, which currently prevents it from buying Irish bonds, could help the country after its planned return to the debt markets to borrow money next year.
"That's an asset that the Government has which they can choose to use - it's there," the official told Reuters, adding that the "firepower" of the €24 billion fund could encourage other investors to buy Ireland's debt.
"Under law, the fund is not allowed to invest in Irish Government paper. To do that would require a change in legislation," the official said, acknowledging that "raiding the fund" could prove politically difficult.
The suggestion is similar to one made by a prominent economist the Economic and Social Research Institute, a think-tank that is influential with Irish government officials.
John FitzGerald, a member of a new Central Bank Commission that replaces the old board of the central bank, has recommended selling some of the fund's investments to reduce the country's overall debt burden.
Reuters