Bloomberg News

Ireland to Discuss Burden Share With ECB as Trichet Resists

July 08, 2011

July 8 (Bloomberg) -- Irish Foreign Minister Eamon Gilmore said the government will discuss with the European Central Bank imposing losses on some senior bank bondholders, even after ECB President Jean-Claude Trichet signaled his opposition.

Finance Minister Michael Noonan said last month that senior bondholders should share in the losses of Anglo Irish Bank Corp. and Irish Nationwide Building Society. Trichet said yesterday the Irish government must respect last year’s bailout agreement which includes no provision imposing losses on bondholders.

“It is something that we’ve always said that we will discuss with the ECB,” Gilmore said today in an interview in Berlin after meeting with German Foreign Minister Guido Westerwelle. “That is something that we intend to do.”

Ireland, which has injected a combined 34.7 billion euros ($49.7 billion) into Anglo Irish and Irish Nationwide over the past two years, is merging both lenders and winding down their assets over a 10-year period as part of efforts to overcome the crisis. The government has said it won’t move on senior bank bondholders without the agreement of Ireland’s bailout partners.

“Anglo and Nationwide are in an entirely different situation than the two pillars banks which are being established,” Gilmore said, referring to Bank of Ireland Plc and Allied Irish Banks Plc.

Ireland sought a bailout last year as the costs of rescuing the financial system became too big to handle alone. Moody’s Investors Service cut the rating of Portugal, which has also been bailed out, to junk this week.

The rating company lowered Ireland’s credit rating in April to the lowest investment grade Baa3 and left the country’s outlook on negative.

‘On Time’

Gilmore said that Ireland is “very much on time and on track” in implementing its bailout program and Ireland’s “different set of circumstances” will protect it from a similar downgrade.

“We are mindful that we do not want what is happening in other countries to have a spillover effect in Ireland,” Gilmore said, adding he’s confident European leaders will conclude a formula for Greek aid next week.

Irish 10-year bond yields climbed 28 basis points, or 0.28 percentage points, to 12.97 percent today.

--With assistance by Finbarr Flynn in Dublin. Editors: Dara Doyle, Eddie Buckle

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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