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Sarkozy blames Ireland for igniting bank deal crisis
Wednesday, 22 October 2008
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French President Nicolas Sarkozy has blamed the Irish banks guarantee for an international financial crisis in which money flows from country to country depending on who is offering the best deal.
He said the Republic's Finance Minister Brian Lenihan's €500bn scheme, covering 11 banks in southern Ireland, has resulted in a total loss of liquidity in the City of London as all the cash flowed to guaranteed banks in Ireland.
Mr Sarkozy said the resulting crisis was serious, but added that, in referring to the Irish guarantee, he was not making a value judgment.
While Ireland was first out of the traps to offer a rescue scheme for ailing banks, the move was quickly replicated across Europe and in the US, as governments offered various deals to protect their financial institutions.
"I believe the crisis calls upon us to reform the European institutions," Mr Sarkozy said, adding that it was important to make "as rapid a response as possible".
He said that as European President, he and others would "work on a road map to see how we can deal with the Irish problem".
Last night a spokesman for the Republic's Department of Finance defended the €500bn package, saying: "The decision made by the Irish Government was the correct thing to do given the circumstances."
The spokesman acknowledged the need to promote stability in Europe and said the Government was supporting President Sarkozy in his efforts to bring that about. A director of the European Central Bank last night also backed the Irish scheme in the wake of Mr Sarkozy's comments.
Jose Manuel Gonzalez Paramo told RTE that Ireland's banks guarantee complies with the EU's approach for dealing with market turmoil.
After the Government approved the €500bn guarantee three weeks ago, other European governments were quick to follow suit with various rescue plans for their own financial institutions.
Germany approved a package worth up to €500bn, France will spend about €350bn and Spain has set aside €100bn.
The bulk of this money will be used to guarantee lending between banks. The cash injection move by France, Germany and Spain was echoed by Austria and Italy.
The UK government has said it will inject up to £37bn of taxpayers cash into Royal Bank of Scotland, Lloyds TSB and HBOS while the Irish deal is a guarantee package, which will cost the banks €1bn and does not involve taxpayers' money.
Mr Sarkozy vowed yesterday the European Union would work to enlist emerging Asian economic giants China and India, themselves potential investors in Europe via wealth funds or corporations, in a summit next month to reform the world's financial system.
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Andy you miss the point of the guarantee. The Irish banking system has assets (based of even the most pessimistic estimates) far in excess of the guarantee. This is not about the Irish government taking on all these assets - that would be crazy. Many international banks are larger than even the largest European economies. This was about underlying the system with Ireland's credit rating to provide confidence and allow the banking sector to more effectively deal with the intentional crisis.
Posted by Jake M | 24.10.08, 12:24 GMT
You have got be kidding Nicholas ! Your hair brained scheme to throw good money after bad in to the moribund Banking sector is about as insane as Brian Cowen's brilliant idea of raising on a busted flush. Ireland does NOT have the money to "Guarantee" up to 500 Billio Euros They already have an Exchequer deficit of 4.9 BN euros so where does the 400BN come from. We are talking the entire Military budget of the US been underwritten by Ireland ? It's time for everyone to get a bit real here. It's one thing to say you have 400BN euros it's completely another to hand over the cash. The money is needed by the European people who are losing their houses, their jobs, their living not by the same gangsters who , through their greed, have put the rest of us in the toilet.
Posted by Andy Hughes | 23.10.08, 22:41 GMT
Sarkozy should stay out of Irish affairs. Who is he to tell us what to do? First he forces our Government into a decision which will make them have a second Lisbon referendum and thus, destroying the last line of democracy in Ireland, and now he's trying to tell us how to run our banks?
This is EXACTLY why we voted no to the Lisbon Treaty. We don't want some sarky idiot in France who we can't vote for trying to dictate how we run things in our country.
Posted by Seán Ó Briain | 23.10.08, 12:56 GMT
Ireland responded quite rightly to what was in its own national interests. The Irish guarantee was a clever move to add confidence to the Irish banking system during a difficult national and international period. Many other countries have now followed Ireland's lead and the plan has been approved by the EU. The guarantee may only be part of the solution as the government may have to add capital to some of the banks unless inter-banking lending improves over the coming months.
Mr Sarkozy has a tendency to stick his nose into just about everything. Perhaps a little more though before he opens his mouth is in order.
Posted by Jake M | 23.10.08, 12:01 GMT
"...deal with the Irish problem."
Shades of days gone by
Posted by Scamp | 23.10.08, 05:13 GMT
Well it was a crafty bluff by the Dublin government as they could never cover any bank collapses, as with Iceland.
Posted by robbo | 22.10.08, 18:55 GMT
Congratulations, Ireland! Now you can love the French the way we Americans do.
Posted by JerryF | 22.10.08, 17:36 GMT
Mr Sarkozy should mind his own business! Who does he think he is ? The emperor of Europe? He is a joke. The Republic did the correct thing. Mr Sarkozy should remember that Ireland is an independant Country and answers only to the people.
Posted by John | 22.10.08, 16:31 GMT
The overt greed shown by the speculative markets and banking insiders is to blame, not Irelands quick response out of the gate. The free market economy must find ways of hedging against outlandish market, property and international banking loans as ways for a greedy few to amortize their ways amongst the many.
Posted by Gerard | 22.10.08, 15:27 GMT