International investors who bought bonds sold by Irish banks must share in the pain of sorting out Ireland’s banking crisis, Fine Gael has declared.
The party has condemned the Government’s plan to set up a National Asset Management Agency to buy up toxic debt, but, equally, it opposes Labour’s nationalisation demand.
Ordinary shareholders in the banks have lost nearly all of their investments, Fine Gael deputy leader, Richard Bruton declared.
“Under the NAMA approach there is no sharing of losses by the providers of other capital – subordinated debt and risky funding such as unsecured bonds who made good profits in the good years but who will walk away scot-free under this proposal,” he said this afternoon.
The NAMA plan will not work because the public will not trust that fair prices are paid for failed property loans, while NAMA will take years longer to deal with them after they have been bought.
The Government will have to raise between €70 and €90 billion of debt to pay for NAMA costs and this will cost €3 billion a year in interest payments.
However, the nationalisation plan strongly pushed by Labour leader, Eamon Gilmore is equally flawed, even though it does deal with some of NAMA’s weaknesses.
Nationalisation “makes it almost certain” that the taxpayer will have to honour every one of the Irish banks’ debts, including bonds.
“There is a moral hazard in capitalism. They can’t expect to be baled out. That is not healthy. Nor can we get into this notion that a bank is too big to fail,” he said.
However, Mr Bruton acknowledged that NAMA could become a reality that cannot be changed if legislation is passed, and it begins work before a general election is held.
"Governments are legally liable for the decisions made by past governments. It would be too late to change anything then," he told The Irish Times.
