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.
For members


When can Irish holidaymakers and second home owners travel to Spain?

Irish holidaymakers and second home owners are currently not allowed to travel to Spain due to Irish government restrictions, but when might this be possible again?

When will Irish travellers be able to return to Spain?
Photo: Josep LAGO / AFP

Spain is one of the top holiday destinations for Irish tourists, being the most popular country for travellers from Ireland for the four years prior to the start of the pandemic in 2020.

In 2019, Spain welcomed almost two million Irish holidaymakers to its shores.

So, when will Irish travellers and second home owners be able to holiday in Spain again?

There is currently an Irish Government Advisory in operation against all non-essential international travel, which means that travel to Spain is not allowed right now, but will this change in time for the summer season?

Taoiseach (Irish Prime Minister) Micheál Martin has suggested that there may be a possibility of holiday travel within Europe starting from late July or August, if the risks associated with Covid-19 are low enough to allow it.

When asked on Morning Ireland RTÉ Radio, whether this will mean that holidaymakers will be able to fly to Spain in late July and August, he replied that the advice was certain that people should avoid all non-essential travel for May and June.  

However, he confirmed that the situation would open up more in July, if transmission rates continued to decline.

“We cannot stay disconnected forever. Ireland is a globalised country,” he said.

“We have to assess all the risks as we move forward. Travel resuming towards the latter half of July is a possibility,” he continued.

Tánaiste (Ireland’s Deputy Prime Minister) Leo Varadkar echoed these sentiments when on April 29th, he told the Irish Independent: “It is, I think just too soon for that return to international travel”, promising the Government would study the issue next month.

“We may be able to allow international travel among countries where the population is substantially vaccinated, but we’re not there yet,” he said.

However, Spain’s Tourism Minister Fernando Valdés has said that Spain will welcome visitors from June.

He outlined the plans at the World Travel & Tourism Council summit in Mexico last week, saying that Spain would participate in a pilot digital certificate scheme in May and would be “ready to receive visitors in June”.

The EU’s Covid-19 certificates, formerly known as Digital Green Certificates, will allow travel to resume across the bloc’s 27 member states by providing information on whether tourists have been vaccinated already, if they have a negative PCR test or if they’ve recently recovered from Covid-19.

READ ALSO: What’s the latest on the EU Covid passports and how will they work in practice?

Initially, Taoiseach Martin highlighted the difficulties in the domestic use of such a document and voiced concerns about how the Covid-19 passport could be discriminatory and limit the freedoms of members of the public who have not yet had a vaccine.

However, on May 1st, it was announced that Ireland is among a group of EU countries that have signed up to a pilot to test the certificate.

A target date of June 1st has been set for the technical launch of the certificates with an actual start date of June 30th. 

It is not yet clear, however, how the millions of people who have already been vaccinated will get hold of one.

So, when the EU’s Digital Green Certificates are finally issued and the Irish government agrees that its citizens can travel once more, it’s likely that travel to Spain can resume. For Irish travellers, it’s looking like a Spanish vacation may be on the cards for late summer.  

READ ALSO: Spain will allow EU travellers with vaccine passports to sidestep covid tests and quarantines