DUBLIN, Sept 17 (Reuters) - European Central Bank President Jean-Claude Trichet warned Ireland against imposing losses on senior debt at Anglo Irish Bank on Saturday, advice it is obliged to heed, Finance Minister Michael Noonan was quoted as saying.
Noonan had requested time with the ECB chief on the side-lines of a meeting of EU finance ministers and officials this weekend to try and change his mind about allowing Dublin to hit unguaranteed senior bondholders at the failed lender.
The pair met for 30 minutes on Saturday, according to the Irish Times newspaper who quoted Noonan as saying he was presented with “fairly good arguments” against any coercive measures to impose losses on such investors.
“I said it was outstanding business, and he said the situation in effect in terms of that had disimproved for two reasons,” the newspaper quoted Noonan as saying on its website.
“First of all that private sector involvement in Greece had a very quick knock on effect into Italy and Spain and private sector involvement didn’t seem to be the way forward if you were trying to encourage the markets,” the minister said.
“Secondly, he said Ireland had done particularly well over the summer. He mentioned the narrowing of bond spreads and he said that he felt that anything to do with burden sharing might knock to the confidence of the market and the spreads would go back out again and that we might lose the ground we had gained.”
Noonan added that it was not for him to close the senior bond question, but that he was obliged to observe advice from people such as Trichet, the Irish Times said.
“I’ll put it to you this way, the amount of money outstanding in unguaranteed senior bonds in Anglo is just about 3 billion euro. If you did some kind of voluntary burden sharing you might gain 100 million, which seems to me that one wouldn’t risk guarantee for that level of money,” he said.
“One wouldn’t risk reputation for that. Anything coercive, the European authorities are dead set against it. So we’ll reflect on it.”
Noonan surprisingly revived the newly elected government’s campaign pledge to go after senior bondholders at Anglo Irish and fellow defunct lender Irish Nationwide Building Society in July in an attempt to win some goodwill among voters ahead of his first austerity budget in December.
Ireland has pumped over 60 billion euros into its ailing banks over the past three years, about half of it going into scandal-ridden Anglo and Irish Nationwide which are being wound down over the next ten years.
Ireland’s Minister of State for European Affairs told Reuters on Friday that the government would keep trying to persuade the ECB to let it impose losses on senior debt at Anglo even if Trichet refused to give it the green light. (Reporting by Padraic Halpin; Editing by Robert Birsel)