Borg critical of possible eurozone bank bailouts

Swedish Finance Minister Anders Borg sharply criticised senior politicians in the EU for bringing up the issue of whether private lenders should take a hit if financially strapped eurozone countries ask for help.

Borg critical of possible eurozone bank bailouts
Swedish Finance Minister Anders Borg in a file photo

Although Borg did not mention anyone by name, he singled out the ideas that German Chancellor Angela Merkel’s government has put forward.

“We had a stabilisation in the market. However, after the statements that were made in connection with the last European Council, these problems came back,” Borg said on Friday.

Borg is especially concerned that private lenders such as banks may have to take a hit if eurozone countries with strained public finances such as Ireland are forced to suspend payments and ask for help.

“There have been individual member countries that have also publicly pursued the line that debt restructuring is on the agenda. I think that it has been an unfortunate thing. It remains a heavy responsibility on those who are initiating this discussion to ensure that it is resolved in a way that we regain stability,” said Borg.

In principle, it may come across as reasonable for private investors to write off the debts if eurozone public finances collapse so that taxpayers do not shoulder the entire burden, according to Borg. However, such a discussion is premature.

“This is an essential discussion that is best to bring up when we have a concrete proposal in place to present. If we bring up the discussion before we have a proposal, we contribute to creating market uncertainty and that I think in this case has contributed to getting into these pressing problems,” he said.

According to Borg, it is also crucial that the Irish government is capable of managing a credible reorganisation policy with budget constraints.

“It is now about us creating clarity about what will happen in the short term so that we can contribute to the stabilisation of the situation in Ireland,” he said.

Ireland has not yet applied for emergency financial assistance from the EU, said a spokesman for the European Commission at a press conference in Brussels, according to Reuters on Friday.

The statement was made in light of rumours on the financial markets that an aid package of €80 billion euros ($109.13 million) has already been decided on and should be announced next week.

The consequences of the new wave of rate worries in the eurozone could, if they continue, quickly push up Swedish mortgage rates, according to Pär Magnusson, chief Nordic analyst at the Royal Bank of Scotland (RBS).

The anxieties deal with a similar risk premium that hit the market after former investment bank Lehman Brothers went under in September 2008.

Underlying upward pressure on mortgage rates has already built up in the autumn as a direct result of Sweden’s central bank, the Riksbank, substantially reducing the volume of its cheap credit to the banks in the form of so-called repurchase agreements.

However, a new external shock is looming and may hit quickly, warned Magnusson.

“Even rock-solid investments such as Swedish mortgage bonds have taken an undeserved beating in the panic that has taken a hold of this. It is not about the creditworthiness of Swedish banks. It is purely a risk-shock effect,” he explained.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Will ‘overrated’ Zlatan haunt Ireland in Paris?

Republic of Ireland manager Martin O'Neill will hope comments he once made about Sweden skipper Zlatan Ibrahimovic don't come back to haunt him when their sides meet in Euro 2016 on Monday.

Will 'overrated' Zlatan haunt Ireland in Paris?
Zlatan Ibrahimovic trains with the Swedish team in Saint-Nazaire. Photo: Janerik Henriksson/TT

O'Neill has been reminded numerous times in recent days that, while working as a pundit a decade ago, he described Ibrahimovic as “the most overrated player on the planet.”

Now 34, Manchester United target Ibrahimovic appears to be getting better with age and heads into the Group E opener match at the Stade de France fresh from scoring 50 goals in all competitions in his final season with Paris Saint-Germain.

“Ten years ago that might have been the case. Lots of things can happen in that time,” O'Neill admitted told a press conference on Sunday.

“He is a top-class player, one of the best in Europe, if not the world. He's Sweden's talisman and will be hard to keep quiet in the course of the game.

“All world class players, no matter how well or closely they are marked, are able to elude things during the course of the game and he is one of those players.”

In a group also containing Italy and Belgium, a defeat for either side could be a decisive early blow to their prospects of reaching the last 16.

Feeling strong

Ibrahimovic is probably gracing a major international tournament for the last time after scoring 11 goals during qualifying for Erik Hamrén's men.

He is familiar with the Stade de France, where he made the last appearance of a prolific four-year spell with PSG in the French Cup final against Marseille three weeks ago.

At international level he is aware of his responsibility captaining a team otherwise lacking in star quality. Ibrahimovic is looking to become the first player to score at four separate European Championships.

“First and foremost we want to start the tournament with a good game,” the Swedish star said. “We need the points. We know we are not the favourites but we are here so that means we are a good team.

“I have played a lot of championships and I go into this tournament with freedom to play as well as I can.

“I feel strong. I go into the tournament with a good season behind me. Hopefully I can bring that with me into the tournament and first and foremost into the game tomorrow (Monday).”

Sweden coach Hamrén indicated that he has a full squad at his disposal, while Jon Walters is set to be available for Ireland after struggling recently with an achilles problem.

“He doesn't have any reaction at the moment. He's feeling fine and I hope he's available for us,” said O'Neill of the Stoke City forward.

Veteran striker Robbie Keane is also available after overcoming a minor knock, although it is likely to be Shane Long who leads the line.

The game is Ireland's first at the Stade de France since they were famously denied by France in a World Cup qualifying play-off in 2009 after a Thierry Henry handball set up William Gallas to score the decisive goal.

Keane had earlier scored for Ireland before the incident that caused an international outcry. But he insisted it is not on his mind now.

“It's something you have to forget about. This is a completely different situation and certainly me and the coaching staff are fully focused on this game.

“I am not one to dwell on the past.”