Feb. 11 (Bloomberg) -- German political considerations may complicate any European-wide initiatives to share the cost of bailing out failed banks, said Micheal Martin, leader of Ireland’s ruling Fianna Fail party.
Irish opposition parties want international authorities to allow the government in Dublin to impose losses on senior bank bondholders. Fine Gael, leading in polls before the Feb. 25 national election, has said European bailout funds should inject capital directly into banks.
“Some politicians here are just acting with bravado and banging tables, that won’t get us anywhere,” Martin said in an interview on Feb. 9 in the Irish midlands. “There are domestic political considerations in other member states, which cause complications. One has to be mindful particularly of the German electoral system.”
Germany will begin holding elections in seven of its 16 states on Feb. 20, involving about 30 percent of the population. About two-thirds of Germans rejected boosting European aid for debt-strapped euro countries in a poll for public broadcaster ZDF published Jan. 28. In talks on an Irish bailout last year, the Frankfurt-based European Central Bank rebuffed a plan to impose losses on senior bank bondholders
“The ECB made it clear to us that even for the unguaranteed senior bondholders, they said they don’t want them burnt as of now,” said Martin, who took over as leader of Fianna Fail last month after Prime Minister Brian Cowen resigned.
Martin wants a European mechanism to help resolve banking problems, which the ECB is now “working through.”
“Ultimately a restructuring or re-burdening is the desirable outcome,” Martin said. “That is the way it should be done on a euro-wide basis. There is interdependence between the banking systems in Europe, so this is not just an an Irish banking problem anymore.”
Bank of Ireland Plc and five other Irish lenders had some senior debt ratings cut by Moody’s Investors Service today, on concern that investors may be asked to share the cost of saving the country’s financial system. Ireland has already injected about 46 billion euros ($62.2 billion) into its banks.
To contact the reporter on this story: Finbarr Flynn in Dublin at email@example.com;
To contact the editor responsible for this story: Colin Keatinge at firstname.lastname@example.org