The Irish Independent reports that the head of the
17-strong group of eurozone finance ministers has been forced into a rapid
U-turn after suggesting the Cyprus rescue deal was a template for other
The comments had cast doubt on Ireland's hopes of getting a deal to claw back
around €25bn of taxpayers' money tied up in the bailouts of AIB, Bank of Ireland
They were also interpreted as a warning for investors with more than €100,000
in a eurozone bank to remove it – and by late afternoon shares in Europe had
tumbled, while the euro dropped against the dollar.
A short clarification rowing back on the original comments was swiftly
issued, in a bid to stem any further losses, although the lasting impression was
one of uncertainty.
As head of the Eurogroup, the Dutch Finance Minister Jeroen Dijsselbloem is
the most influential of the euro-area finance ministers and played a central
role in talks on the Cyprus bailout.
So global investors and the international markets were shocked when he said
European taxpayers' money should not be used to bail out banks – and signalled
that Cyprus-style raids on bank savings above €100,000 would be the alternative.
He was speaking after eurozone finance ministers approved a €10bn bailout for
Cyprus in Brussels that avoids pumping European money into the country's failed
The Dutchman's comments also looked like a major blow to Finance Minister
Michael Noonan, who is locked in delicate negotiations to get the emergency fund
known as the European Stability Mechanism (ESM) to help pick up the tab.
Mr Dijsselbloem said the aim was for the ESM never to be used.
"We should aim at a situation where we will never need to even
consider direct recapitalisation," said Mr Dijsselbloem.
He said that other countries may have to restructure their banks,
sparking fears more countries could follow Cyprus by imposing losses on
wealthy bank depositors, if banks fail in the future.
European and US stock markets fell following his initial remarks
after rising on news of the bailout.
But in a short statement issued last night, the Eurogroup chief
rowed back on his earlier comments and said Cyprus was a "specific case".
"Macro-economic adjustment programmes are tailor-made to the
situation of the country concerned and no models or templates are used," he
And Mr Noonan's Department of Finance said it was still pushing for
a deal on our banking debt, in line with an agreement reached last year to
separate banking debt from the State's balance books.
The agreement granting Cyprus a €10bn bailout came early yesterday
amid pressure from European authorities.
The country will have to dramatically reduce its banking sector –
creating a good bank, bad bank model – with some depositors with savings of
more than €100,000 taking a significant hit. Those with less than €100,000
will be protected.
The Irish Independent also reports that credit unions are now among the most aggressive businesses to pursue debtors
through the courts.
According to data from business information firm Vision-Net, credit unions
have so far secured some 160 judgments worth about €3.7m this year.
That rate is increasing, with 19 judgments worth €1.7m hammered out in March
alone – a rise of more than a third on February.
At the current pace, credit unions will secure judgments worth close to €16m
against debtors by the end of the year.
Some credit unions are exposed after being burned for €14bn by the
liquidation of the former Anglo Irish bank. Taoiseach Enda Kenny has insisted
that no depositors will be affected in this regard, as there is a compensation
But credit unions are often having to pursue their debtors more aggressively
to balance their books.
In March the average judgment value increased sharply to €128,000.
The biggest single judgment has been for about three-quarters of a million
euro, while Charleville credit union in Cork has secured a judgment of €521,000.
Vision-Net's managing director Christine Cullen said credit unions were well
known for pursuing debts through the courts.
"Credit unions have a long history in how they handle defaulters and they
would be among the top plaintiffs since 2008.
"Interestingly, there have been few signs of forbearance within the industry,
especially considering the new personal insolvency laws will be coming into
"Many of those loans would be unsecured, and we have noticed the value of the
amounts owed have increased steadily," she added.
Unlike the banks, credit unions have traditionally been used for relatively
small loans for holidays and cars and such, but during the boom Ms Cullen said
it appeared the value of loans doled out increased sharply.
"One of the notable things about a credit union is that people are in general
much more likely to make an effort to pay its loans than other debts such as a
"They play a vital role in many communities and people tend to go the
extra mile for them," she added.
In value terms, Roscrea Credit Union has gained the highest amount of
judgments – worth €773,605 so far. The seventh biggest, meanwhile, is St
Patricks, the ESB staff credit union in Dublin, with judgments secured worth
Finglas Credit Union has secured 23 judgments so far in 2013, nearly
three times as many as the next lender.
The Irish Times reports that the chief of the euro zone finance ministers has
questioned whether the ESM bailout fund will ever be used to rescue
banks directly, casting fresh doubt over the Government’s demands for
more debt relief in Europe.
The remarks by Dutch minister Jeroen Dijsselbloem set off a
wave of renewed volatility in financial markets – with heavy losses in Italy and
Spain. The Government has insisted, however, that it continues to make progress
in its campaign to deploy the ESM to help meet the cost of rescuing Allied Irish
Banks and Bank of Ireland.
“We will continue to work with our European partners to
ensure Ireland is in a position to avail of the new recapitalisation tools that
are being developed,” said a spokesman for the Department of Finance.
The Cypriot deal broke new ground by imposing big losses on
large-scale bank depositors and senior bondholders, who were protected in
bailouts for Ireland, Greece, Portugal and Spain. Unlike the agreement which
collapsed last week, Cypriot depositors with less than €100,000 will not lose
Mr Dijsselbloem’s suggestion in an interview with Reuters and
the Financial Times that the new plan would be a model for the future
was at odds with claims by other European leaders that the Cypriot arrangement
was unique to the country.
He later backtracked, but his remarks drew a distinctly cold
response in Dublin. Senior Government sources said there had been no discussion
about repeating the Cypriot formula.
The Department of Finance spokesman said this second
statement “fully reflects” European policy. “The 29th of June agreement to break
the links between the banks and the sovereign is the stated policy position of
euro zone heads of state and governments,” he said. “We should aim at a
situation where we will never need to even consider direct recapitalisation.
“If we have even more instruments in terms of bail-in and how
far we can go on bail-in, the need for direct recap will become smaller and
smaller . . . let’s deal with the banks within the banks first.”
Mr Dijsselbloem later rushed out a statement saying Cyprus
was a specific case requiring bail-in measures. “Macro-economic adjustment
programmes are tailor-made to the situation of the country concerned and no
models or templates are used.”
As confusion reigned in the markets following Mr
Dijsselbloem’s comments, Cypriot president Nicos Anastasiades addressed the
nation for the first time since agreeing the €10 billion bailout package for the
country. In a 10-minute TV address he asked Cypriots for their patience, while
the crisis is resolved, and pledged to appoint investigators “to find out where
responsibility lies” for the crisis.
Yesterday, Cypriot residents were coming to terms with the
bailout package agreed in Brussels in the early hours of Monday morning. The
European Central Bank confirmed yesterday it will continue to supply liquidity
to Cyprus’s banking sector.
All Cypriot banks, except the two biggest banks Laiki and the
Bank of Cyprus, are set to reopen today and there will be no limitations on
The Irish Times also reports that a row over rents between coffee group Bewley's and its landlord Ickendel, part
of the Treasury Holdings group, has been settled in the High Court.
Mr. Justice Charleton ruled this morning that the rent payable by Bewley's
Grafton Street to Ickendel must be allowed to fall to market reflective rates
under the provisions of the lease.
The case was regarded as a test case in the contentious area of upward-only rent
review lease agreements.
Ickendel had taken a High Court action against Bewley's on the grounds that it
could not reduce rents on the premises because it only permitted "upwards only"
Bewley’s argued that the lease, which was first entered into on September 22nd,
1987 with a term of 35 years, allows rents to fall in line with market values,
as well as rise. It said that the case was of “vital importance” to the
financial survival of Bewley’s Grafton Street. Under the lease, rent was to be
reviewed every five years, with the last review, in 2007, fixing a rent of € 1.5
million on the premises.
Bewley's has welcomed the decision of the High Court and the market rent will
now be established by an arbitrator who is already appointed.
The catering and food group recently that the café was losing approximately €
700,000 a yeardue to grossly excessive rents and that 25 jobs had been lost in
the café since the rent increase. The losses are being funded from other parts
of the group, with group profits falling by 68 per cent to € 0.5 million in
The Irish Examiner reports that debt written down as part of a mortgage arrears resolution process could be
eligible for capital acquisitions tax at a rate of 33%.
Under legislation, debt written down as part of a personal insolvency
arrangement or a debt settlement agreement is exempt from capital acquisitions
However, there is no exemption for debt written down by a bank under the process
and consequently this would be taxable under self-assessment, according to the
Association of Chartered Certified Accountants (ACCA).
“Just say you had a debt writedown of €100,000 under process, then you would
have to declare this in self-assessment. If a person did not declare it, then
the Revenue could come after you in a few years and add penalties and interest,”
said the ACCA’s Aidan Clifford.
Capital acquisitions tax applied to debt writedowns was devised by Revenue to
clamp down on a loophole. Individuals were avoiding capital acquisitions tax by
extending a loan to a third party and then subsequently writing off this loan as
a bad debt.
However, a Revenue spokesperson said commercial agreements involving debt
restructuring or forgiveness or write-off entered into on an arm’s length basis
were not regarded as giving rise to a gift for capital acquisitions tax
“Technically, the definition of ‘disposition’ in the Capital Acquisitions Tax
Consolidation Act 2003 includes ‘release, forfeiture, surrender or abandonment
of any debt’, and is subject to capital acquisitions tax in certain situations.
However, in relation to a debt writedown, restructuring, or debt forgiveness,
“subject to being satisfied as to the bona fides of particular arrangements, the
Revenue approach from a for capital acquisitions tax viewpoint is that we assume
that financial institutions, in entering into such arrangements with customers
in financial difficulties, do so solely for commercial reasons and are not
intent on making a gift of any sort to the mortgagor (householder)/debtor.
Commercial agreements involving debt restructuring/forgiveness/write-off entered
into on an arm’s length basis are not therefore regarded as giving rise to a
gift for capital acquisitions tax purposes.”
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