Fianna Fáil has offered a cautious response to the proposed European agreement on bank debt saying that the Government now needs to answer a number of questions about how it will work.
The party’s finance spokesman Michael McGrath said the recognition by EU leaders of the need to break the link between bank debt and sovereign states was welcome but “long overdue”.
“The possibility of directly recapitalising banks and the reference to examining the Irish financial sector in order to improve the sustainability of our Programme of Assistance offer hope of a deal for Ireland,” he said.
He called on the Government to clarify how much of the €64 billion injected into the banks could be recouped and what the proposed agreement would mean in relation to the framing of the upcoming budget.
“The Government now needs to spell out exactly what deal we are seeking on foot of this morning’s decision and what the consequences are for Ireland."
Sinn Féin president Gerry Adams welcomed the prospect of a reduced debt burden and investment in the field of job creation but said he believed the Government was “overselling” the deal.
“Minister for Foreign Affairs Eamon Gilmore described this agreement as a 'game changer'. He said it would lift the bank debt burden from Irish taxpayers and that the deal was retrospective and would be applied to the Irish recapitalisations,” Mr Adams said.
“However, this is not what this morning's European Council statement says.”
Mr Adams said it was clear that the agreement reached on the growth agenda was also being over sold.
“There is only €10 billion of new investment by the EU,” he said. “Austerity remains a key pillar of the EU's approach to the crisis. Yet the EU continues to pour billions of into the banks. It is clear that the European Council is still not serious about growth.”
United Left Alliance finance spokesman Richard Boyd Barrett said he was fearful that the deal was little other than “an accountancy trick” that would make little difference to the State.
“People should celebrate when we hear the Government say they are going to reverse some of the cuts or that they are going to take further proposed cuts off the agenda as a result of this,” he said.
“I suspect any deal will in fact be conditional on continuing with the austerity drive and with more centralising of budgets to Europe which isn’t something to celebrate in my opinion.”
Mr Boyd Barrett said the removal of banking debt from the sovereign would not alter the State’s debt burden as the debts would remain on the balance sheet as the majority of them were under State control.
Tánaiste Eamon Gilmore said the developments in Brussels represented “a massive breakthrough” for the State which “really changes the game for us as far as bank debt is concerned”.
Mr Gilmore said the separation of State and bank debt would help to shrink the debt to GDP ratio and that this would “enable this country to recover much faster than was the case up to now”.
“It will make things easier for the State’s people,” he said.
Asked about the fact that the statement from the EU leaders did not mention action being taken on retrospective banking debts, Mr Gilmore said he was not concerned and took it that the Irish bank recapitalisation would be covered.
"I do take it as that,” he told RTÉ radio. “That is the approach we have been taking in our discussions with the European institutions and with other European Union member states. We have argued that the level of bank debt is crippling and would be one of the major obstacles to Ireland going back to the market next year."
Mr Gilmore said the “single biggest difficulty” the Government had been dealing with was the level of bank debt that the State has been carrying.
“This goes back to the time that the previous government made a decision in September 2008 to basically make the taxpayer responsible for the debts of the banks,” he said.
“This lifts that burden from the Irish taxpayer and means that the European taxpayer, at a general level, through the ESM is basically taking on responsibility for it. It does mean we now have help in bearing this burden and that will enable this country’s economy to recover much fast than otherwise would have been the case.”
