UCC meeting hears bondholder payments 'necessary'

“I voted for Labour and Fine Gael in the hope that they would not give another red cent to the banks, but I feel totally betrayed,” said Karen Doyle from Cobh at a protest outside AIB this week. 

Over 50 people protested against the payment of €1 billion unsecured bondholders outside AIB headquarters in Cork on the South Mall.

“I feel the bank bailout is unjustified, it is immoral it is wrong, it is taking money from the ordinary people of this country who are on their knees at the moment” said Ms Doyle.

“Everybody has debts to pay, we all do and we all want to pay our debts but have nothing left to give,” said Ms Doyle who is a member of the anti-household charge campaign.

Speaking at the protest, Diarmaid Ó Cadhla from the People’s Convention lambasted the trade union leadership as bad as “the vested interests which control the state.”

“The trade union leadership, on their vulgar salaries, do not represent the members.”

Socialist Party Councillor Mick Barry confirmed that a national demonstration is being planned by all anti-austerity groups for Dublin on 24 November, in the run up to the budget.

AIB raised interest rates on Wednesday morning for mortgage holders on variable rates by half a per cent, adding a monthly €30 to repayments on every €100,000 borrowed. 

'Not an ideal situation'

A European Commission advisor, speaking in Cork this week, insisted that not paying unsecured bondholders would cost the country more in the long run.

Nigel Nagarajan, the resident advisor on economic and financial affairs with the European Commission in Ireland, was speaking at a seminar in University College Cork on Tuesday evening.

“I understand there is a lot of anger with the supports of the failed banks and the payment of bondholders is controversial," said Mr Nagarajan.

"If Ireland were not to pay, there is no way of knowing how the markets would react, and to make a decision like that you need to know how the markets will react.”

“It’s not an ideal situation.”

However, Mr Nagarajan highlighted that there is light at the end of the tunnel for the country to return to bond markets and that the country needs to adopt good policies for the current times.

“Ireland had bad policies in the good times, which led to bad times,” said Mr Nagarajan.

“What the country now needs is good policies in bad times, which will eventually lead to good times. It won’t happen overnight, but it will happen.”

Beneficial in medium term

John Mullins, CEO of the Bord Gáis Group, insisted that the payment of the bonds in the “medium term” would be beneficial for Ireland in terms of confidence from other markets and that “often the unsecured bondholders tend to be the secured bondholders in other markets and are often linked to pension funds.”

However, UCC economics lecturer Dr Seamus Coffey said senior bondholders “should not have been paid.”

“However, not paying the unsecured bondholders is a bit like arresting someone’s brother to get at the person who did the crime. The bond issue is not the sole source of why we find ourselves where we are economically.”

Earlier in the seminar, Mr Mullins had asserted that the problems that the country now faced were caused domestically, and not by the European Union. He called for more investment in infrastructure such as a national broadband plan but also highlighted the need for tougher actions on pay packets.

“We must have pay restraints,” said Mr Mullins, whose salary was recently capped at €250,000, down from €399,000 in 2010. Bord Gáis is currently up for sale as part of the Government's revenue raising policy, and it it is thought that the company could fetch €1.5 billion. 

“We must also look at the the issue of public sector pay increments under the auspices of Croke Park. None of these actions have anything to do with Brussels but everything to do with Dublin.”

Mr Mullins also urged political leaders to “draw a line” under any deals that are being done on a retrospective deal on bank debt for certain countries.

“We just need to get on with it. I know we’re in a recession but that will normalise.”