The Irish Independent reports that Brian Lenihan had a blunt message for his cabinet colleagues: keep the faith and cut government spending before increasing taxes.

Cutting €3bn from the Budget in December is a priority, but the Finance Minister was even more concerned about keeping the coalition in government. None of those present know if they will attend the cabinet meeting in Farmleigh next year, but the mood was more upbeat yesterday than it was last summer. The all-day cabinet meeting in July is about the Budget in December and the macro-economy was the headline topic as they spoke in big brush-strokes.

"There was a sense that some of the big-ticket issues such as banking are being addressed and coming to a conclusion," said one minister. "The Bank of Ireland is coming through but the jury is still out on Anglo." The minister added that no one should be too surprised if something drastic is done to Anglo. But the same minister said he expected the bank guarantee scheme to be continued when it comes up for renewal in September.

The Cabinet sat looking on as Mr Lenihan leafed through the 50-page memo dealing with the €40bn capital programme circulated before the session.

It was withheld from ministers because experience has taught the Department of Finance that it would have been leaked if it had been distributed before the meeting.

Around €1bn will be cut from the capital programme for projects, but ministers had already been asked to prepare another list of programmes to be shelved.

Lively

All of the ministers had been asked to prioritise cuts in their own department, but there were a number of lively exchanges and passionate contributions.

Ministers were told what the EU Commission, the OECD and the IMF expected of them and that they all want the budget deficit slashed.

A property tax is in the Programme for Government, but it is more likely to be a flat tax like the charge on a second home rather than based on the value of the property.

But nothing has been decided and after the cabinet members were told about how income tax revenues have fallen and are expected to fall, ministers fell silent.

From another memo, ministers learned about the rising numbers of unemployed and that an increasing number are highly skilled young people. "That was really depressing and worrying," said a minister later.

Creating jobs is to be fast-tracked, although Mr Lenihan acknowledged that no government could create jobs.

And anyone not taking up a job offered to them can expect to have their welfare payments cut, said a source: "There could be punishing sanctions if jobs are refused."

Yesterday was only the beginning of a political journey that ends in December and whatever happens, it will be the public who pays for the tickets.

The Irish Independent also reports that Anglo Irish Bank, Bank of Ireland, AIB and IL&P have all been downgraded by Canada's largest ratings agency on the back of a weakening of the government's position.

The four banks mainly issue debt with a government guarantee, but the Toronto-based agency has also downgraded Ireland one notch to AA as its starts to cover the Irish economy full time.

All four had their long-term ratings lowered to AA from AA (high). The decision impacts upon the banks' deposits and long-term debt issues, but not their short deposits or short-term debt. The agency said the ratings were now stable, meaning a further downgrade is not expected in the short term.

Yesterday the agency published a note on Ireland as well, praising recent actions by the Government. Awarding the country an AA rating, the agency said: "The AA rating reflects Ireland's structural strengths -- an open economy, highly skilled workforce, flexible labour market and strong political institutions."

Ireland had come up with an "exemplary policy response", said the agency.

"However the stable trends could be changed to negative if the planned austerity measures for the 2011 budget are not fully implemented,'' said the agency.

Meanwhile, the Irish banks are bracing themselves for this Friday's announcement of European stress test results.

European regulators plan to detail three scenarios when they publish the results, according to a document by the Committee of European Banking Supervisors (CEBS).

Banks will publish their estimated Tier 1 capital ratios under a benchmark for 2011, an adverse scenario and a third test that includes "sovereign shock", according to CEBS.

In the last scenario, banks will publish their estimated losses on sovereign debt held in their trading book as well as "additional impairment losses on the banking book" that they may suffer after a sovereign debt crisis, according to a document dated July 15.

Meanwhile, M&T Bank, in which AIB has a major stake, said it had second-quarter earnings of $1.53 a share, beating analysts' expectations.

The Irish Times reports that Premier Hotels Ltd, one of the subsidiaries of hotel management firm Prem Group, is facing liquidation after failing to agree a deal on a six-figure rent arrears bill with one of its landlords.

The company, which was a joint venture with developer Paddy Kelly and his family until they exited last year, has called a creditors’ meeting for early next month to appoint a liquidator.

Premier Hotels previously managed six of the Prem Group’s properties but it transferred the other businesses to new Prem Group companies between June 2009 and May 2010. Up until yesterday, it had only been responsible for Days Hotel, Dublin airport.

The Dublin airport hotel’s landlord, Pierse Santry Cross, part of the Pierse construction group, appointed a new operator to the hotel yesterday, but would not reveal the company’s identity. The hotel will not close and the change will not affect its 35 staff.

Premier issued a statement saying that it has been in talks with Pierse to secure a rent agreement that reflects market conditions. “A satisfactory outcome was not reached and a decision has been taken to cease our management of this property,” it said.

A spokesman for Pierse confirmed that the pair had had talks, but added that there had been no meaningful discussions about arrears owed by Premier to its landlord. “They have decided to put the company into liquidation, we did not force them,” he said.

Premier’s spokeswoman refused to say how much in arrears it owed Pierse Santry Cross. The bill is said to run to a substantial six-figure sum.

The company’s latest accounts only show figures for the year 2007 when it lost €245,000 before tax. The returns say that up to May this year, Premier had built up arrears on various hotels that it had leased and was managing.

Between June 2009 and May 2010, it transferred the leases on a hotel in Kilkenny, and three in Dublin, Leeson Street, Park West and Sandyford, to new special purpose companies established by its parent to lease and manage them individually under new terms agreed with the landlords. At the same time it gave up a lease on a Harcourt Street hotel.

Two Premier shareholders, Peter Reddan and Gerard McNulty, control a new holding company, Arago Investments, set up in April 2009, which in turn controls the Prem Group. Jim Murphy, one of its founders, is its managing director. Arago took over Premier and its subsidiaries and controls the special purpose vehicles to which the other four hotels were transferred. Consequently, Premier’s liquidation will not affect those businesses.

Accounts for Premier show that at the end of 2007 shareholders’ funds were €1.4 million in the red.

Prem Group manages hotels in Ireland, Britain, Belgium and France. Its spokeswoman said yesterday the overall business was performing well.

The Irish Times also reports that Allied Irish Banks has secured a €25.9 million summary judgment order against Cork businessman and developer, John Fleming, over his guarantees of loans to Fleming Energy to buy a majority shareholding in a US energy company.

Mr Fleming – who had previously indicated he wanted to defend the claim – was no longer advancing a defence, Mr Justice Peter Kelly was told yesterday by Sarah McKechnie, for Mr Fleming. Her client was neither consenting to nor opposing judgment, she said.

In those circumstances, Mr Justice Kelly granted an application by Bill Shipsey SC, for AIB, to enter summary judgment in the amount of €25,994,340 plus costs and Courts Act interest from yesterday.

The claim arose from a guarantee executed on May 20th, 2008 by Mr Fleming, now with an address at Holbrook Close, Billericay, Essex, England.

The guarantee related to all liabilities to the bank to a maximum €26 million of Fleming Energy, with registered offices at New Cork Road, Bandon, Co Cork, a subsidiary of the JJ Fleming group of companies, and was part of the security provided for credit facilities advanced to Fleming Energy.

The main loan provided to Fleming Energy was $32.4 million advanced in June 2007 to assist with the purchase of a 51 per cent shareholding in Plymouth Energy LLC, a company registered in the US and established to purchase and develop a 57-acre site in Iowa.

AIB said it had agreed not to demand repayment of the loans while companies in the Fleming group were under court protection but, after after protection was ended last March, it issued demands for repayment.

Also last March, the bank had issued a demand under Mr Fleming’s guarantee and some €25.9 million was now due and owing, it claimed.

The High Court last March appointed a liquidator to three insolvent companies in the Fleming building group, which has debts of more than €1 billion, following the Supreme Court’s decision to end court protection for them on the basis they had advanced no reasonable survival schemes.

The Irish Examiner reports that the Irish economy could be one of the worst affected by any sudden rise in global energy prices — with a new survey suggesting GDP could fall by as much as 7.5% on the back of a sudden price increase.

The fact that Ireland — as a small economy — is heavily reliant on export demand and highly dependent on imported fossil fuels means it would feel the effects of large international oil and gas price rises more than larger economies like the US, Britain and the wider eurozone.

European engineering giant, Siemens conducted the report into Ireland’s vulnerability to potential energy price shocks and has called on the Government to develop a high-level strategy covering the next 40 years, to benefit from the potential of renewable energy outlets. It is recommending greater use of electricity in the nation’s transport system and the positioning of Ireland as an attractive test-bed for sustainable pilot projects.

The company said the report was conducted taking into account plausible boundaries of future prices over the next 15 years.

"Ireland’s 80% dependency on imported oil and gas puts the economy at considerable risk. And yet, Ireland is surrounded by an abundance of renewable resources that could reduce our risk of exposure, create employment opportunities and reduce emissions," according to Siemens chief executive, Dr Werner Kruckow.

"Irish waters have the biggest wave heights, greatest tidal flows and strongest winds in Europe — giving us the potential advantage over other European countries to generate and export energy across the continent," he added.

Pointing to the heavy falls in international oil prices in 2008 as an example of how sudden energy prices can increase or decrease, Siemens said anything from rising demand from emerging economies and political/social conflict to natural disasters can affect change in price; but a diminishing supply pool from which to extract the resources at low cost should also be considered a risk.

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