Lenihan defends reticence to tell public about talks

MINISTER FOR Finance Brian Lenihan has defended the Government’s stance on informing the public about discussions with the European Commission, the International Monetary Fund and the European Central Bank.

In a Dáil debate on banking strategy, he insisted “the job of Government is to protect the taxpayer” and “that is what we have been doing”. He said: “If the Government has been reticent in making public comment, it has been in the interest of protecting the taxpayer.

“Jumping to conclusions ahead of the facts is not to the benefit of the taxpayer, nor is it in our interest to do this in advance of the discussions that are now taking place.” He said the “facts can best be established after a short and focused discussion”.

Labour finance spokeswoman Joan Burton asked Mr Lenihan who was leading the Irish negotiating team. He replied: “I am in charge of these negotiations.” He continued: “I am not participating in the conduct of the discussions because they are of a technical nature”. He said those involved were Department of Finance officials, assisted “by officials from the National Treasury Management Agency who are subject to my direction”.

Mr Lenihan said he agreed with comments by governor of the Central Bank Patrick Honohan that a “substantial contingency capital fund” could be made available to the State which could “create confidence in the firepower available but not drawn down by the banking system”. Mr Lenihan said the governor expressed the clear expectation that discussions would result in such a fund, and this, if it happened on the basis he advocated, “would be a very welcome development for the State”.

He stressed that “we are not at that point at this stage”. He also repeatedly emphasised that bank deposits “are safe” and would not be affected by the discussions. “Depositors can depend and rely on the protection afforded by the State guarantee which has been extended for a further 12 months to the end of 2011.”

Later during a question-and- answer session, when asked by Fine Gael finance spokesman Michael Noonan about the deposit guarantee limit, Mr Lenihan said: “It is not limited to the €100,000 permanent guarantee which is established in our statute law, but also extends by virtue of the vote in the House yesterday evening on an unlimited basis to all deposits, be they corporate or retail.”

Pat Rabbitte (Labour, Dublin South West) said banks were borrowing from the ECB at a 1.5 per cent interest rate, but would now be borrowing at 4.5 per cent or 5 per cent. He asked the Minister whether it was “likely that a chunk of the monies will go into the banks after being borrowed by the State at what will certainly be a higher rate of interest than is currently the case”. Mr Lenihan said “That is correct. It is an important issue in these discussions.”

He added: “The problems we are addressing are of a structural character in the banking system.” The “purpose of the technical discussions that are being initiated in Dublin today is to assess the possibility of building on the significant interventions already undertaken by the Irish authorities” to “secure an enduring and permanent resolution to the problems of our banking system”.

Asked by Joe Behan (Independent, Wicklow) whether the Government would seek Dáil approval for any deal when negotiations concluded, the Minister replied he would seek the advice of the Attorney General. “The Government does not generally require specific authority to borrow money, but this is a more unusual circumstance.”