–Irish Government Extends Guarantee Of All S-T Bank Liabilities

BRUSSELS (MNI) – Restoring confidence in Ireland’s banking system
is the key to restoring investor confidence, Irish finance minister
Brian Lenihan said on Tuesday.

The minister was talking just after his government announced that
its guarantees for short term bank liabilities, including corporate and
interbank deposits as well as debt securities, would be extended from
the current expiry date of September 29 to December 31 2010.

Irish bond spreads have widened in recent weeks as investors worry
about problems in the banking sector, in particular at Anglo Irish Bank,
and the knock on effect these will have on the economy.

Lenihan dismissed questions about whether Ireland will need to tap
the E440 billion European Financial Stability Facility – a backstop
facility set up in May this year for countries that lose access to
capital markets.

Asked if Ireland was set to tap the fund, the minister said: “No,
because the markets have remained open to Ireland.”

He said, “the question of the stability fund wasn’t raised” at his
meeting on Monday with European Competition Commissioner Joaquin
Alumina, and he was “satisfied” that Ireland could deal with its banking
losses over time.

He said the extension of the guarantees on bank liabilities was
“part of the gradual phasing out of the guarantee scheme,” but he
wouldn’t be drawn on whether the guarantees would need to be extended
again.

“We have to restore that confidence,” Lenihan said, adding that the
key to this was restoring the banking system. “We are working through
those issues,” he said.

Lenihan said the Eurozone finance ministers have “full confidence
in the stress tests” carried out on Europe’s banks in July.

The Irish minister was speaking after attending a meeting of
Eurozone finance ministers here on Tuesday.

“Ireland was far from the main topic,” he said.

Lenihan said the widening of Irish bond spreads over the benchmark
German Bund, “reflects wider European trends.”

Jean-Claude Juncker, who heads the Eurozone finance ministers’
club, the Eurogroup, told reporters that Ireland’s banking problems and
resulting financing costs were a problem for the Irish government to
address.

“We were listening carefully to our Irish colleague and all of us
are convinced the government will be able to manage the situation,”
Juncker said.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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