BERLIN (MNI) – The problems of Ireland’s banking system pose a risk
of contagion to other Eurozone countries, European Central Bank
Governing Council member Yves Mersch warned in a newspaper interview
released Wednesday.
The central bank president of Luxembourg also blasted the
Franco-German proposal for reform of the EU’s Stability Pact as too lax
and advised against a pre-conceived mechanism to make creditors shoulder
the risks of an eventual sovereign debt restructuring.
Asked by the German daily Die Welt whether investors’ mistrust of
the Irish banking system could spill over to all highly indebted
Eurozone countries, Mersch replied, “The danger cannot be ruled out.”
“I don’t believe one can criticize Ireland for not taking enough
measures,” he said. “The problem is that the country’s bank sector is
overstretched.”
“The decision to accept aid for its banks is entirely up to Ireland
alone,” he acknowledged. “However, the ECB will review its risk
management as well.”
For the editors of Die Welt, this last comment contains an
encrypted warning to Ireland that the ECB is not prepared to buy up
Irish government bonds eternally.
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