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News : Irish Economy Last Updated: Mar 14, 2011 - 5:14 PM


Kenny says Noonan will meet Trichet on Irish banking crisis
By Michael Hennigan, Founder and Editor of Finfacts
Mar 13, 2011 - 8:33 AM

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Taoiseach Enda Kenny (r) apparently giving some grim news to Jean-Claude Juncker, prime minister of Luxembourg and head of the Eurogroup of Eurozone finance ministers, Brussels, March 11/12, 2011.

UPDATE Monday, March 14: The Minister for Finance Michael Noonan will meet European Central Bank (ECB) president, Jean-Claude Trichet, and EU economics commissioner Olli Rehn in Brussels today, ahead of his first meeting of the Eurogroup of Eurozone finance ministers.

Noonan is reported to be seeking the establishment of a working group to examine how the additional funding for Ireland’s stricken banks can be agreed.

There are fears that current bank stress tests will reveal a requirement for more funding than Ireland can reasonably afford.

In January, the Central Bank appointed 3 expert external advisors to assist it to execute the Prudential Capital Assessment Review (PCAR) and Prudential Liquidity Assessment Review (PLAR):

The giant US fund manager BlackRock Solutions was assigned to perform reviews of asset and data quality of those banks participating in the PCAR and PLAR.

US consultants, The Boston Consulting Group, were to provide project management resources for the Central Bank’s Financial Measures Implementation Project. It is to also contribute advice for the PCAR and PLAR.

Barclays Capital was assigned to provide advice on banking sector structure issues. It is also contributing advice on matters arising from the PCAR and PLAR.

Sunday, March 13: Taoiseach Enda Kenny said on Saturday at the conclusion of a special summit of the 17 leaders of the Eurozone that the Minister for Finance Michael Noonan will meet Jean-Claude Trichet, president of the European Central Bank, on Monday to discuss the Irish banking crisis and in particular stress tests of the banks and funding issues.

The Taoiseach met Trichet at the summit in Brussels and the ECB president has agreed to also meet the Taoiseach prior to the crucial summit on Eurozone reform, which will be held on March 24 and 25th.

At the weekend summit, Eurozone leaders agreed to cut the interest rate on Ireland's EU-IMF loans by 1% from the current level of almost 6% but Germany and France insisted that Ireland would have to reciprocate with a change in its corporate tax system.

The summit agreed a Pact of the Euro on closer governance and coordination in the common currency area.

In return for Greece agreeing to a €50bn privatization and public property sale programme, the council cut the interest rate on its loans by 1% and the maturity for all the programme loans to Greece will be increased to 7.5 years, in line with the IMF.

The leaders also agreed to allow the existing €440bn European Financial Stability Facility (EFSF) rescue fund to buy sovereign bonds of debt-embattled governments when they are initially auctioned, a move that that could enable countries with high borrowing costs to raise cash at much lower yields.

The Taoiseach said that he had a "good vigorous and vibrant discussion" with French president Nicolas Sarkozy on the corporate tax regime.

"We weren't satisfied with what Ireland agreed to today, so the question of lowering interest rates has only been addressed for Greece," said German Chancellor Angela Merkel.

“Obviously, this is a very touchy subject for our Irish friends,” Nicolas Sarkozy, the French president said. “It’s hard to have other countries help or bail out Ireland when Ireland has the lowest corporate tax rates in Europe.”

Sarkozy added that Kenny would be given until the summit in a fortnight to agree the deal.

"The question that was being asked of me was to make references to our corporate tax rate. I made it perfectly clear on many occasions that this was not something that I would contemplate and didn't this evening," the Taoiseach told reporters.

He rejected both an increase in the tax rate or the introduction of a common consolidated corporate tax base (CCCTB), which he termed as a "back door" route to tax harmonisation.

"In respect of both the CCCTB and the corporation tax rate, that for me this was an issue that I couldn't contemplate. But I did say that in respect of other elements of the pact I would of course engage constructively with our colleagues around the table," he said.

Ernst and Young Report on the CCCTB (pdf) commissioned by the Department of Finance

CONCLUSIONS OF THE HEADS OF STATE OR GOVERNMENT OF THE EURO AREA OF 11 MARCH 2011 (pdf)

“Ireland was disappointed at the end. It basically got nothing,” The Wall Street Journal quoted an official.

“I think the reason for this is that their government is still very new and they have a way to go in order to prove that they are on the right track,” the official said. “They were also very demanding which I think angered everyone in the room.”

In this particular context, that is surely good news in terms of the open round of talks!

Taoiseach Enda Kenny (l), Jean-Claude Juncker, prime minister of Luxembourg and Nicolas Sarkozy, French president, Brussels, March 11/12, 2011.

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