Former Irish Prime MinisterGarret FitzGerald, who wrote that Ireland could fall “into the hands of the International Monetary Fund,” said the political opposition should back the government’s plan to set up a so- called bad bank.
Fine Gael, the opposition political party that Fitzgerald led in the 1980s, has said it will vote against the bad bank, known as the National Asset Management Agency. The agency will buy 90 billion euros ($129 billion) of loans from lenders in a bid to purge their balance sheets of souring real-estate assets.
“My concern is that a defeat on this issue, or on the budget, could be very destabilizing for our capacity to borrow,” Fitzgerald said on RTE radio in Dublin today. “Everyone is watching in financial circles abroad to see how we carry this through.”
Finance Minister Brian Lenihan will today defend the plan at a parliamentary committee before a full debate by lawmakers on Sept. 16. Current Fine Gael leader Enda Kenny described the agency as a “gamble” and wants to create a new bank with a credit facility of as much as 20 billion euros. Allied Irish Banks Plc (ALBK) and Bank of Ireland Plc, the country’s two biggest lenders, face combined loan losses of 21 billion euros in the three years through 2010, Merrion Capital analyst Sebastian Orsi said today in a note.
Fitzgerald said in an Aug. 29 article in the Irish Times that he was prompted to intervene in the debate on concern about Ireland’s ability to maintain its “recently improved credibility in the international financial markets.”
The yield, or spread, between 10-year Irish debt and benchmark German notes has reduced to 157 basis points from 284 basis points in March, which was the highest level in at least a decade.
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