Some hedge funds eager for Irish “No” on EU treaty – Finance Minister Lenihan
DUBLIN, Sept 28 (Reuters) – Hedge funds which bet unsuccessfully that Ireland would default on its sovereign debt want the country to reject the EU’s reform treaty this week to recoup some of their losses, Finance Minister Brian Lenihan said on Monday.
Irish credit default swaps, financial derivatives which offer insurance against the government defaulting, have plunged in recent months as Dublin tackled its fiscal and banking crises, easing concerns of an Icelandic-style implosion.
Lenihan said that a “No” vote in Friday’s referendum on the European Union’s Lisbon Treaty would shake Ireland’s international reputation, raising its borrowing costs. Hedge funds which were losing out on the fall in Irish CDSs wanted such a result, he added.
“Quite a number of these hedge funds have taken out specific bets on CDS, on the insolvency of Ireland, and clearly they see a ‘No’ vote as assisting a bet which is now failing,” he told a news conference.
Five year Irish CDSs have dropped to 136.5 basis points from a record 385 basis points earlier this year.
Politicians across Europe have accused hedge funds of exacerbating the global financial crisis, and G20 leaders agreed last week that those above a certain size should be authorised and obliged to report data to supervisors.
Irish voters rejected the Lisbon Treaty last year, shelving the EU’s foreign policy ambitions. Opinion polls show a majority now support the treaty, which needs to be ratified in the second Irish referendum for it to take effect across the 27-member bloc.