–Adds Ireland Government Reaction
BRUSSELS (MNI) – The European Commission on Wednesday approved the
extension of a guarantee scheme for Ireland’s credit institutions, which
was set up by the country’s government to help banks access funding.
Ireland’s finance ministry welcomed the Commission’s approval of
the scheme extension, saying it “will underpin the Government’s efforts
to restore the financial system and support the funding position of the
participating institutions in the Guarantee scheme.”
Irish Finance Minister Brian Lenihan said in an e-mailed statement
that, “the government is determined to rebuild consumer and investor
confidence in our financial system, which has an important role to play
in ensuring businesses, and notably SMEs, can invest for growth.”
He added: “The approach has now received the endorsement of both
the European Commission and the ECB.”
The EU executive said it would extend the approval of the scheme
under its anti-trust arm until the end of June 2011. The approval of the
scheme – which comes up for renewal every six months – had been set to
expire at the end of this year.
“The Commission considers the extension of the measures to be in
line with its guidance on support measures for banks during the
financial crisis,” the Commission said in a statement. “The guarantees
are an adequate means to remedy a serious disturbance in the Irish
economy.”
Irish sovereign debt spreads have widened dramatically in recent
weeks as investors increasingly fear that the country won’t be able to
manage its debt burden without outside help.
The costs of the banking system will boost Ireland’s budget deficit
to 32% of GDP this year. The government has committed to getting the
deficit below the EU’s 3% limit by 2014. Stripping out the banks, the
deficit is expected to be around 12% this year, still one of the largest
in the Eurozone.
–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com
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