In recent times Irish election campaigns effectively ended 24 hours before the day of polling and the campaign for the local government and European Parliament elections ended on midnight Wednesday. However, the Government parties broke the informal moratorium on the broadcast airwaves on the eve of polling, by holding a press conference on Thursday with the taoiseach and three ministers seeking to make broadcast news today and news on the newspapers on Friday -- polling day -- by announcing that €500m in additional credit will be made available to Irish SMEs (small and medium size businesses) through the establishment of the Strategic Banking Corporation of Ireland (SBCI).
The governing parties as planned, used the announcement to take advantage over Opposition parties and independents.
The Government's spin machine, using staff on the public payroll, could have scheduled this announcement weeks ago but there has been a game plan in recent weeks to use State resources to tie ministerial announcements with the governing parties' election campaigns.
We warned this week that this is the start of a two-year campaign of using public money for political advantage in the period leading up to the next general election that has to be held by spring 2016.
The Strategic Banking Corporation of Ireland (SBCI) is a new company and it is intended that it will be initially financed by the German Promotional Bank KfW, the European Investment Bank (EIB) and the directed portfolio of the Ireland Strategic Investment Fund (ISIF).
Today’s announcement marks the delivery of a key commitment in the Government’s Action Plan for Jobs 2014, and comes as the Government published the ninth Action Plan for Jobs Quarterly Progress Report, showing that 97 out of the 103 measures earmarked for delivery in Q1 2014 have been implemented. - See more at: http://www.enterprise.gov.ie/en/News/Over%20%E2%82%AC500million%20in%20new%20credit%20to%20be%20made%20available%20to%20Irish%20SMEs%20through%20Strategic%20Banking%20Corporation%20of%20Ireland.html#sthash.o27SqTJd.dpuf
Richard Bruton, enterprise minister, said today: "Today’s announcement marks the delivery of a key commitment in the Government’s Action Plan for Jobs 2014, and comes as the Government published the ninth Action Plan for Jobs Quarterly Progress Report, showing that 97 out of the 103 measures earmarked for delivery in Q1 2014 have been implemented."
The Department of Finance explained the new SME credit facility:
Current Retail Banks in Ireland
An established SME that wants to borrow to facilitate upfront expenditure on new
machinery. It needs to match loan repayments on that capital investment with the
future extra revenue or productivity savings from that investment. SME 1 could
benefit from a SBCI funded loan whose key feature is an extended repayment
holiday. This improves SME 1’s financial sustainability as its cash flow risk
has been reduced.
SME 2 is a new start up that would be financially more sustainable if it could pay back a loan to finance capital investment over a longer period than is available to SMEs at present. Its current bank wants the capital repayment to be paid back over three years but a loan funded through the SBCI could be paid back over 6 years.
Fergal O'Brien, head of policy at Ibec, the principal business lobby, said: "Today's announcement is long overdue, but very welcome. As we emerge from the crisis, business is now looking to invest again. The SME sector, in particular, needs a more diversified financing offering. The KfW model addresses a very specific market failure in the financing model for German business, and the Irish Strategic Banking Corporation can do the same here.
"Irish SMEs are currently paying one percentage point more for finance than the
eurozone average. The new state backed bank must help address this challenge and
provide new financing opportunities for firms that may not get funding through
the existing bank network.
The Small Firms Association (SFA), a unit of Ibec, said the €500m earmarked for the initiative was not enough to address the problem.
AJ Noonan, SFA chairman, said: "Finance remains an acute problem for small firms and while today's announcement is a step in the right direction, it does not go far enough. The €500m of funds being made available is a tiny fraction of the current €27 billion business banking market. Much more ambition is required. Small companies, which are the backbone of the economy, continue to struggle to access finance. Viable firms continue to go under as a result."
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