Lenihan leaves a ten billion euro question

A decision by the Dublin government to defer the recapitalisation of the banks until after the 26-County general election has been condemned as ‘a stroke’ by the opposition parties.

Minister for Finance Brian Lenihan announced on Wednesday that he is postponing a scheduled further injection of 10 billion euro into the banks.

His announcement came after the now nationalised Anglo Irish Bank revealed a 17.6 billion euro loss for the calendar year 2010, surpassing last year’s loss, and setting a new Irish record.

Last week the same bank fuelled public outrage over the banking crisis when it paid out a further three quarters of a billion to the bank’s international bondholders -- an amount which roughly equates to the cuts imposed on social welfare recipients this year -- even though there was no legal requirement to do so.

Lenihan’s announcement also came as the new, government-appointed chief of Anglo, Alan Dukes, demanded yet another 15 billion euro in funds to sustain it and other Irish banks in the medium term. Mr Dukes also repeated his assertion that the banking recapitalisation requirement will soon surpass 50 billion euro.

Fine Gael finance spokesman Michael Noonan said Lenihan’s move “looks like a classic Fianna Fail political stroke to ensure they are not announcing bad news which would aggravate taxpayers in the last week of the election”.

Mr Noonan pointed out that the injection of the 10 billion in capital funds was a key condition of the hugely controversial 85 billion euro EU/IMF bailout deal negotiated late last year by Minister for Finance Brian Lenihan.

“This is not happening, yet the Minister has not provided an adequate explanation,” he said.

Lenihan has so far refused to explain why the deal, which he had previously insisted could not be renegotiated in any respect, could now be departed from unilaterally.

Labour Party finance spokeswoman Joan Burton attacked Fianna Fail for “playing electoral politics” but also criticised and Fine Gael’s “pre-election crocodile tears for Irish taxpayers”.

She pointed to a change of heart by Fine Gael in its attitude to covering the funds being paid out by the state’s banks to their corporate investors, at the taxpayers’ expense.

“It shouldn’t be forgotten that their finance spokesperson, Michael Noonan, was quoted as recently as last October saying that it was not worth risking the reputation of the country by negotiating with senior Anglo bondholders,” she said.

Urgent Appeal