Irish parliament approves bailout package

City A.M. Reporter
IRELAND'S parliament has narrowly voted in favour of an €85bn (£71bn) EU/IMF bailout, paving the way for the IMF to approve its portion of the funds later this week.

Deputies voted 81 to 75 in favour of the package, which provides €35bn in support for the banking sector and €50bn to cover the country’s borrowing costs over the next three years.

Finance Minister Brian Lenihan pushed the package through with the support of independent MPs and told the centre-right Fine Gael party that its proposals to lean on senior bondholders would fail because of opposition from the European Central Bank.

“Those who think we can unilaterally renege on senior bondholders against the wishes of the ECB are living in fantasy land,” he said.

Fine Gael earlier said it had no moral or legal obligation to honour all of its banks' debt as it prepared to vote against a controversial multi-billion euro EU/IMF bailout.

The party, which will likely lead a coalition government following an election next year, said it would seek to renegotiate the rescue package to ease the burden on the taxpayer.

The EU/IMF deal provides enough money to recapitalise its banks, shattered by bad debts, while preserving full repayment of its senior bonds -- those first in line to be repaid in the event of any default.

But Fine Gael said investors who hold bank senior debt not covered by a government guarantee, amounting to around €15bn euros, should take a share of losses, so lessening the amount that Ireland had to borrow under the EU/IMF deal.

“You have the obscene situation now where the poorest of the poor in Ireland, through their taxes and welfare cuts, are being asked to guarantee the speculation of investors in hedge funds,” Michael Noonan, Fine Gael's finance spokesman, told the national broadcaster RTE.

“Ireland has no moral or legal obligation to cover this debt. That's why it's a bad deal, that's one of the principal reasons we're going to vote against it, and that's why it has to be renegotiated.”