–Says Cost Of Financing Too High At Present
–Says Market Needs Time To Absorb Information
–Plans To Announce 4-Yr Plan On Budget In November

BRUSSELS (MNI) – Ireland will return to the sovereign debt markets
next year after the markets have had sufficient time to assess the
recent banking sector announcements and the four-year budget plan that
the government will set out in November, Irish finance minister Brian
Lenihan told a news conference in Dublin on Thursday.

Lenihan was speaking to reporters after the country’s central bank
announced that bailing out troubled lender Anglo Irish Bank would cost
E29.3 billion, assuming the currently expected scenario materializes,
but that it could cost up to E34.3 billion if the situation gets worse.
The central bank said the additional costs meant that the country’s
budget plans needed adjustment.

“Markets have been very difficult since summer time of this year,”
Lenihan told a news conference in Dublin.

He said the country’s National Treasury Management Agency wouldn’t
be raising any more money this year, “because the interest rates are so
high.”

Irish 10-year bond spreads hit a fresh high versus the German Bund
on Wednesday as investors worried about the total cost of bailing out
the banks and how that might impact Ireland’s debt and deficit levels.

“We’ll return to the markets in January,” the finance minister
said.

He said the markets “need to see the credibility of our track on
the fiscal front” and that his government needed “time and space to
implement” the measures.

Lenihan noted that European Union officials didn’t think his
country needed help from the E440 billion European Financial Stability
Fund. “We believe we will demonstrate a credible pathway out of our
difficulties,” he said.

The finance minister confirmed his intention to spell out in
November a four-year budget plan, setting guidelines for expenditure and
revenue together with a detailed budget for next year. The budget, he
said, will outline how Ireland can get its budget deficit back to
target.

Ireland is aiming to get its budget deficit, not including the
banking costs, below 3% of its GDP by 2014 — down from around 11% of
GDP this year. Including the cost of bailing out the banks, the budget
deficit is expected to rise to around 32% of GDP this year.

Ireland has already outlined cuts of E3 billion for 2011, but it
will need to make more to hit the target, Lenihan said.

“The adjustment that’s required next year will now have to be put
in a different context,” the finance minister said.

“In the light of the emerging data…it will require a significant
adjustment,” he said. But he wouldn’t be drawn on details ahead of
November. “The government isn’t rushing into giving this figure or that
percentage,” he said.

“I don’t anticipate that hospitals will have to close, or schools
will have to close,” Lenihan said. But he admitted that Ireland would
have to get “absolute value for money” from its services sector.

“We are a small country with a very fragile banking sector,” he
acknowledged.

Lenihan said senior debt would have to be repaid because of the
negative message that would be sent to investors if it wasn’t. “We can’t
send out a message that senior debt can be dishonored,” he said.

He said that the banking sector situation could have taken longer
to sort out because while Ireland has the protection of the Eurosystem
and the protection of the European Central Bank, “we have limited
monetary artillery at our disposal.”

“I don’t think we could have [gone faster],” he said. “I think in
terms of the long-term interests of the country, that was the right way
to go.”

The finance minister said action had to be taken to prevent the
banks “becoming a systemic threat to the state itself.”

The European Commission’s antitrust arm has given the green light
to E24.3 billion worth of aid for Anglo Irish Bank, and will need to
give its approval to any state aid above that amount as well as giving
final approval to the government’s plan to split the bank up.

European Commissioner for Economic and Monetary Affairs Olli Rehn
told reporters in Brussels that he welcomed the Irish government’s
announcement and he supported Brian Lenihan, while Jean-Claude Juncker,
who chairs the Eurogroup club of Eurozone finance ministers, said he
thought it was “very unlikely” that Ireland would need external help.

Ireland’s banking system became deeply indebted after the Irish
property boom collapsed.

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

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