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Government must explain if it was duped or if it misled Irish people on retroactive recaps: Doherty

27 September, 2013 - by Pearse Doherty TD

Reacting to comments from the EU’s bailout fund Chief Klaus Regling pouring cold water on the prospect of a retroactive recapitalisation of Irish banking debt, Sinn Fein Finance spokesperson, Pearse Doherty TD, has said it is time for the government to say if it was duped or it misled the Irish people about the prospects for recouping the banking losses.

Deputy Doherty said:

“Mr.Regling’s comments today are another blow to the government’s hopes that some or all of the money pumped into failed banks by the people could be returned to the taxpayer. The strength of his comments that the necessary consensus was “difficult or impossible” raises questions about why senior government Ministers were so vocal in claiming victory for Ireland on this issue.

“The question now has to be asked –were they duped or did they mislead the Irish people about the prospects of recouping the €30bn of banking debt.

Enda Kenny called the June 2012 commitment from the Eurogroup to separate banking and sovereign debt as a "seismic shift” while Eamon Gilmore called it a “game-changer.” Fifteen months later they must say if they were duped or whether they were misleading in those comments.

“In two weeks’ time this government will impose another austerity budget caused in large part by bailing out the banks under pressure from the EU. They must come clean now on whether there is the remotest prospect of a cent of the bailout being recouped by the Irish taxpayer. I will be quizzing Minister Noonan on this issue next week in the Dail and demanding real answers.”

From Wall Street Journal:

WSJ: Perhaps we can talk a little bit about the issue of retroactivity of bank debt in the Irish context. Do you think that’s an option for Ireland? Dublin has certainly not given up hope.

KR: Yes, I know that, but I also know that some other member states of the euro area have said that this will be either difficult or impossible. The agreement of the Eurogroup on the direct bank-recap instrument, on the main features so far, which is not a final agreement, say that in exceptional circumstances, on a case-by-case, this may be possible. To do it would require consensus. That requires in some member states parliamentary approval, and that in my view seems to be very, very difficult. Direct bank recap as part of a banking union is a very useful instrument. And in the long run, when we are under a common supervisor, it will make some sense conceptually to have common European financing. Because if something goes wrong in six or eight years, it will be the mistake of the common supervisor, European financing can then come into play. If something goes wrong now, or in the near future, one cannot blame the European supervisor for what is the mistake of national action and therefore some countries are reluctant to finance that together. At the same time the euro area governments have committed to break the link between sovereigns and banks.

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