European Commission backs plan, says Lenihan

MINISTER FOR Finance Brian Lenihan has insisted that the European Commission supported his proposal to pay above the market value for impaired loans and believed it was unavoidable.

He said that “in fact these sections (on valuing the loans) have been drafted on the basis of [European] Commission advice. That is the basis of them.”

Mr Lenihan stressed: “The commission accepts that this is not just appropriate but inevitable in the case of virtually every member State that adopts an asset relief scheme,” he insisted.

“And yet you hear in the public debate that there is something unusual that this Government is uniquely thick-headed about this.”

As the Dáil Finance Committee late last night reached the controversial “valuation methodology” section of the National Asset Management Agency (Nama) Bill to deal with impaired banks, Mr Lenihan read into the record some of the advice received from the European Commission, which he circulated to deputies.

The commission advice also said that the “value attributed to impaired assets in the context of an asset relief programme, the transfer value, will inevitably be above current market prices in order to achieve the relief effect”.

Criticising the Opposition’s approach, he said: “We have decided that we are unique in the world in respect of the this asset relief programme where we now discover that the European Commission expect every state to do that and expect the value attributed to impaired assets to be inevitably above current market prices.”

Labour finance spokeswoman Joan Burton said the Minister, “by having a separate notion of the long-term economic value is seeking to artificially inflate the value of the assets, thereby putting the economy of this country at a significant disadvantage by the decision to overpay on such a grand and grandiose scale for the distressed loans of the banks, given to property developers in particular”.

The sums involved were enormous and the Minister has advised the Commission that the €4 billion injected into Anglo-Irish Bank was unlikely to be recovered and he had a proposal later in the Bill to inject probably a further €1 billion in the Irish Nationwide Building Society and probably €500 million in the EBS and “all or most of this money will be gone with the wind”.

Ms Burton said “the Minister has decided to throw economic logic to the winds and for the sake of floating the boat of the bankers to come up with an artificial structure which seeks to overpay for the assets at the cost of the Irish taxpayer”.

Fine Gael finance spokesman Richard Bruton described the Minister’s strategy as “a serious blunder of monumental proportions. It’s a €7 billion own-goal in my view”.

He called for Mr Lenihan to explain how he was going to calculate the long-term economic value.

Earlier he asked “why he has made the choice to overpay for the assets rather than take the extra shareholding. I think that most people would see that having the extra shareholding would be a much fairer shareout of the risks involved.

Pat Rabbitte (Labour) said the “the system that we have constructed here is to avoid the alternative of taking a majority shareholding”.

Mr Lenihan said “there is a broad indication that we’re moving around the right road”.