Varadkar defends Government risk in Covid-19 small business loan scheme

Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar has defended the Government’s decision to take on 80 per cent of the risk under the Covid-19 lending scheme for small businesses, saying it was important for the banks to “have some skin in the game.” 

The Government cannot force the banks to lend to businesses he told RTÉ radio’s Morning Ireland, so it was important for the bank to have 20 per cent of the risk otherwise there would be no disincentive for reckless lending, he said.

The €2 billion Covid-19 Credit Guarantee Scheme will be the largest of its kind for businesses in the history of the State and will provide low-cost loans to firms impacted by the virus.

Mr Varadkar said he will be meeting with all the banks this week to discuss the scheme and he felt the best approach was to trust and verify that what is promised is delivered on. The Government does not have the legal power to force the banks to lend, but businesses would have recourse to the Credit Review Office, he said.

On the Covid-19 pandemic unemployment payment, Mr Varadkar said that it will be phased out as “it would not be affordable to keep it forever.” He pointed out that some people would be better off on regular social welfare payments, especially if they have dependents.

The idea is to regularise the situation over time and to bring payments back in line with regular unemployment payment. A full suite of measures to assist the hospitality industry will be implemented shortly, he added.