European Central Bank executive board member Lorenzo Bini Smaghi



Political attempts in Ireland to get the IMF/EU bail out deal renegotiated were dismissed by the European Central Bank last night which warned that reneging on the deal was not an option.

Fine Gael and Labour, the two parties expected to form the new Irish government, have both made renegotiation of the deal an election issue.

But Lorenzo Bini Smaghi, an executve board member of the ECB, last night said it was not possible.

He also said Ireland's case was made more difficult because it refuses to raise its corporate tax-rate from 12.5 per cent.

"What looks strange is that Ireland wants to stick to its own tax system but then doesn't want the taxpayer to pay for it when things go wrong...I think it's right that Ireland should choose its own tax system but then it has to have the ability to stand by it when things go wrong, when corporation tax collapses because of a crisis," he told RTE's Primetime which can be seen here.

When asked if a new Irish government could get a better deal on the interest rate paid on the European part of the bail-out, Bini Smaghi said:

"No, there are standard procedures again. It went through the democratic process. It doesn't happen when you have a change of government that the next government reneges on commitments. The programme has been signed and it has to be implemented."

He also said that defaulting on even a portion of senior bondholder debt - something Fine Gael also want to do - would be undesirable as it would prompt "a run on the banks".

Bini Smaghi's remarks came amid growing speculation that the EU will reduce the interest rate paid by Ireland and Greece.

Fine Gael last night suggested Bini Smaghi was a lone voice and not to be heeded. Communications spokesman Leo Varadkar said it was ecofin - European finance ministers - who set the interest rate not the ECB.

"He is only one person, he doesn't speak for the ECB itself. The rules of the EFSF and EFSM are made not by the ECB and the ECB doesn't set the interest rate. It's made by ecofin," said Varadkar.

Judging by the reaction on Twitter last night, the Irish public weren't too impressed with Bini Smaghi either.

Here's a sample:

GTCost Constantin Gurdgiev

@mediabite #rtept was informative - a window into the soul-less, distorted world of European policy-makers' thinking. Esp Barroso clip

johnjoechad John Finucane

#rtept this polished dude, who is in charge of a broke institution, yes the ECB are broke, telling us what to do eh?

gibbonsleo Bernard Gibbons

#rtept trail of money leads back to Germany banks and other Europe banks they lent to the likes of Anglo & I as a tax payer am to blame

TalentCoop TalentCoop

Lorenzo Bini Smaghi the European Central Bank worth watching - Europes not for turning - so Ireland may have to - http://j.mp/gsEmo6 #rtept

mcj66 Morgan C.Jones

by TrichD

To those who scoffed at the suggestion that the Lisbon Treaties left too much open to hijack by the EU - thanks, you're *great* #rtept

liamooo Wills Duffy

by ajc110

#rtept WTF, hello, the Irish taxpayer is paying !!!!!!

theresemurphy Therese Murphy

by athlonegay

The German banks recklessly lent and we're paying for it. End of.#rtept

18 minutes ago Favorite Retweet Reply

maosco Mike Sullivan

@declanganley @GTCost have is on v good authority that all major UK & EU banks are expecting Ireland to default at 6% #rtept #vinb#ge11,

18 minutes ago Favorite Retweet Reply

sdempsey Shane Dempsey

#rtept with respect, why is Miriam asking is a rate cut realistic? The ecb sets the rate & will do anything to avoid euro collapse

tomfinnerty tom finnerty

@tomfinnerty Go Sinn Fein! Can't believe I said that but there it is.....#rtept

rkkx Ray Kenny

@MaryTCon @liamooo Because our stupid Minister of Finance guaranteed the banks, on our behalf. We are now the target, not banks #rtept

And proof that Ireland is still suffering crisis-fatigue:

PotatoInsertion Paul Kennedy

Y'know what? This is bliss. I haven't watched the news, little radio, no #rtept. Just the odd glance towards Twitter. I'm so calm.

aine_gannon Aine Gannon

Decided to watch shameless USA instead of #rtept. Going by tweets, shameless is less depressing

And here's a youtube video for the weekend - former taoiseach Bertie Ahern, widely considered as the architect of the financial crisis, heckled by members of the public.

Yesterday was his last day in the Dail after 34 years and here he does what he now does best, shift the blame and complain no-one told him the banking crisis was on the cards when he was in power.