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U.S. was concerned over bailout risks

January 18, 2012

By Staff Reporter

 

Treasury Secretary Timothy Geithner.

 

Formerly confidential documents released to RTÉ News by the U.S. government show that officials in the Treasury Depart-ment were concerned that the Irish bailout could be derailed by poor growth and a lack of Irish government spending.

The documents, according to RTE, detail how U.S. Treasury Secretary Tim Geithner used a meeting with Finance Minister Michael Noonan in order to assess domestic threats to the Irish bailout.

“Briefing notes also reveal that Mr. Geithner was acutely aware of allegations – made here in Ireland – that he had personally vetoed plans to burn Irish bank bondholders.” the report stated.

According to the documents, Geithner used two separate meetings with Taoiseach Enda Kenny and Minister Noonan to assess risks to the bailout “both domestic and external.”

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His officials noted that the new coalition had campaigned on promises to renegotiate the bailout.

Stated the report: “Officials encouraged Mr. Geithner to quiz Mr. Noonan on how the Irish economy could grow when its main trading partners were experiencing problems, noting that the success of Ireland’s bailout program would depend heavily on export growth.

“They noted that the size of the government deficit precluded the prospect of any stimulus spending and that the euro had appreciated against the dollar and the pound. They also sought clarity on how the Irish government planned to raise money for the Irish banking system – concentrating on junior-bond holders, many of whom were based in the U.S.”

The documents also revealed that Geithner was also warned about concerns in Ireland that he had personally vetoed plans to “burn” bank bondholders during the bailout talks.

A note told him to expect questions from Mr. Noonan about his contact with the International Monetary on the matter and that the taoiseach faced “sharp domestic criticism” after admitting to not asking President Barack Obama about it during the presidential visit to Ireland in May, 2011.

The documents, said the RTE report, also reveal that Mr. Geithner came under political pressure on Capitol Hill due to worries that Ireland might default on its International Monetary Fund loans.

Senators wrote to the Treasury Secretary over their concern that the U.S. might be lending to a country that had behaved irresponsibly. Geithner, in turn, responded by saying that the U.S. taxpayer had never lost a cent from an IMF loan and he was confident that (in the case of Ireland) it would be repaid in full.

Against the back drop of the report, both Minister Noonan and Taoiseach Kenny have dismissed reports that Ireland might actually need a second bailout.  Noonan described as “ludicrous” talk of a potential second bailout.

Noonan said such talk was speculation by economists who “at the start of the year speculate on these matters.”

He said the fifth review of the current program has just commenced and was going well while Ireland was “fully funded” until 2013.

Taoiseach Kenny also said there was no question of a second bailout when quizzed by reporters outside government Buildings in Dublin.

 

 

 

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