IMF: Ireland could have saved billions by burning Anglo bondholders

The IMF has said that Ireland could have saved billions of euro if it had been allowed to burn the bondholders at some of its banks.

It says there would have been "significant" benefits for the Irish public if senior bondholders in Anglo Irish Bank and Irish Nationwide had been burned.

The Government has previously said it wanted to burn senior bank bondholders, but the plan was blocked by the ECB.

When asked what could be learned from the Irish experience, Ajai Chopra, the former head of the IMF mission to Ireland, said "it is unfair to impose the burden of supporting banks primarily on domestic taxpayers while senior unguaranteed bank bond holders get paid out.

"This not only adds to sovereign debt, but it also creates political problems, making it harder to sustain fiscal adjustment."

He said that the practice of "burning" senior bank bondholders is “now becoming more accepted”.

However, he said that this is no longer an option for Ireland, which had “paid off these creditors at great cost”.

The IMF's Craig Beaumont said that burning bondholders at the other surviving banks could have been more risky.

"If you limit it to the two failed institutions, there would still have been some significant benefits," he said.

"If you went for a broader approach obviously the possible fiscal savings would be larger, but you would have greater concerns about potential implications for those banks' abilities to access funding going forward."

Transport Minister Leo Varadkar says that the Troika forced us to pay the bondholders, rather than burning them.

"Well, they certainly didn't do us any huge favours, but that's the situation the country was in," he said.

"It was unable to fund itself, had nowhere to turn to at the time but the Troika and the money that they lent us to allow us to keep the schools open, to keeps pensions paid ... there was a cost, yeah."

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