Bloomberg News

Noonan Concerned Ireland May Be Engulfed by Greek Crisis

June 16, 2011

(Updates with additional comments from Noonan in fourth paragraph, analyst in last.)

June 16 (Bloomberg) -- Irish Finance Minister Michael Noonan said he “fears” the country could be engulfed by the Greek debt crisis, as he sought to calm investors’ concerns that the government will seek to impose losses on senior bank bondholders.

“People are nervous,” Noonan said in an interview on Bloomberg Television’s “In Business” with Margaret Brennan in New York today. “Ireland isn’t Greece, we’re structured differently. Our fear here is that there would be some knock-on effect which will impact adversely on Ireland.”

Noonan called on the Greek government to resolve its political difficulties. As violence erupted in Athens, Prime Minister George Papandreou announced he would name a new government and call for a vote of confidence in parliament in an effort to pressure rebel lawmakers into backing an austerity plan that would secure a new bailout and avert a default.

“We have a very strong mandate and we have the support on issues from the opposition,” Noonan said of Ireland’s coalition government. “Greece is entirely different. There seems to be no cross-party support.”

Irish bonds were little changed today, with the yield on the 10-year debt at 11.55 percent as of 5:20 p.m. in Dublin. The extra yield investors demand to hold the country’s 10-year bonds rather than German securities of similar maturity was at 8.64 percent, after earlier widening to 8.72 percent, a euro-era record.

Bondholder Plan

Noonan said yesterday that senior bondholders should share in the losses of the nationalized Anglo Irish Bank Corp. and Irish Nationwide Building Society, reversing a policy of protecting owners of senior securities. Today, he said there was “no urgency” to the plan and his comments had been given too much weight because of the crisis in Greece.

Ireland won’t act unilaterally on Anglo Irish and Irish Nationwide, Noonan said. The government, which has injected a combined 34.7 billion euros ($49 billion) into the lenders over the past two years, is winding them down over a 10-year period.

Noonan said the “last red cent” of debt owed by the government and Ireland’s so-called “pillar banks” will be repaid. The government has said it won’t impose losses on the senior bondholders of those lenders, Bank of Ireland Plc and Allied Irish Banks Plc.

Ireland sought an international bailout last year as the costs of saving its banks and financing the budget deficit became too big to handle. The government has failed to negotiate a reduction on the 5.8 percent interest rate on its aid loans amid French demands that the country raise its 12.5 corporate- tax rate. Noonan said the tax will not be increased.

“Noonan is not playing political theater here,” said Ray Kinsella, banking professor at the Smurfit Business School at University College Dublin. “His comments are a declaration of serious intent to get Ireland back on the European political agenda.”

--With assistance from Joe Brennan and Cormac Mullen in Dublin. Editors: Fergal O’Brien, Craig Stirling

To contact the reporters on this story: Margaret Brennan in New York at mbrennan25@bloomberg.net; Dara Doyle in Dublin at ddoyle1@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net


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