Business

Irish bank debts to be honoured, says finance minister

  • 27 September 2010
  • From the section Business
Irish Finance Minister Brian Lenihan
Image caption Mr Lenihan says the Irish Republic must retain the confidence of the money markets

The Republic of Ireland must "honour its obligations" to retain the confidence of the global money markets, Irish Finance Minister Brian Lenihan has said.

Speaking to the BBC, Mr Lenihan said the Irish economy had now "stabilised".

But he said keeping creditors to the country's ailing banks on side was essential to the recovery.

The country's banking sector has continued to struggle following the financial crisis.

"Irish banks are very dependent on the international wholesale money markets," Mr Lenihan told the BBC's business editor, Robert Peston.

"Those who acted in good faith to Irish lending institutions have to be convinced that Ireland will honour its obligations and Irish banks will honour their obligations.

"If those obligations are not honoured, Ireland's funding position in the future will be perilous."

There had been some speculation that the Irish government would attempt to renegotiate some of the debts owed by the Irish banking sector.

'Remarkable turnaround'

Later this week, the government is expected to reveal the full cost of its bail-out of the industry, which is expected to total tens of billions of euros.

Some 22bn euros has already been spent on rescuing banks hit by the collapse of the Republic's property bubble.

Mr Lenihan's comments also follow the news that the Irish economy shrank again in the second quarter of the year, having initially recovered from a deep recession, which saw gross national product fall by 10% in 2009.

But the finance minister said the figures showed that the economy had "stabilised".

"We've seen a stabilisation of the Irish economy and that's a remarkable turnaround," Mr Lenihan said.

"We've managed to do that because we've been consistent in our budgetary policies.

"There are stormy waters ahead for Ireland, but we will weather them because we've been consistent in our approach."

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