Government must carefully consider recapitalisation
As the speculation on recapitalising the banking sector continues Sinn Féin Economic Spokesperson Arthur Morgan has today outlined a number of considerations that must inform the government's decision.
Deputy Morgan said,
"Despite the current recession and the collapse of the property sector there is no evidence that the government or the banking sector have addressed their respective failings. Budget 2009 and the Credit Institutions Act terms and conditions have failed to put in place sufficient measures to turn around the economy or reform Ireland's financial sector. Both were opportunities the government failed to grasp.
"The decision to recapitalise the banks is another such decision the government may have to make. If this is going to happen the terms attached of any such deal need to represent the interests of taxpayers who will foot the bill. The government's failure to secure any real payback for the people from the terms of the Credit Institutions Act cannot happen again. If recapitalisation is decided on it must be treated as an opportunity to properly regulate and reform Ireland's lending institutions.
"Another consideration is the need for small to medium size businesses to have access to sensible lending facilities. New businesses cannot get off the ground without an initial cash injection. Many of these businesses are now being denied credit by banks as liquidity becomes a major issue for both sectors. Start-up businesses and the SME sector must benefit from any state recapitalisation scheme.
"Any capitalisation of the banks should be funded from government borrowing and not the National Pension Reserve Fund as has been suggested from some quarters. This Fund should be invested in infrastructure where there is a guaranteed immediate return. Borrowing will increase the states debt however in the context of the current public finance crisis and Ireland's serious infrastructural deficit impacting negatively on the states economic viability this course may be the only option available to the government. In addition any money invested in the banks by the state must be done so in return for a majority share holding. There is a strong argument for significantly increased state involvement in the banking sector and consideration could be given to the prospect of a state bank.
"The government still has a window of opportunity to turn around the economy and stimulate the states finances. It needs to deal with the issues underlying the financial sectors crisis. If it chooses not to, no amount of political effort will get the economy back on track." ENDS