Taoiseach defends AIB share sale and dismisses ’family silver’ sale suggestions

"As the money was borrowed, and as it came from the National Pension Reserve Fund, the money will of course be used to repay our debt which in turn reduces our debt service costs, which is important too," Mr Varadkar told RTE.

He went on: "In relation with what we do with the money, some people in the Opposition are conflating different issues.

"The money that was put into AIB in the first place was borrowed money ... so having borrowed the money we’re going to use the money that we now receive from the sale to pay down our national debt and that’s the appropriate thing to do. If you borrow money you can pay it back.

"Infrastructure is a different issue. We have spending ceilings. Those spending ceilings derive from the fiscal rules, derive from the Fiscal Treaty which we voted for in a referendum derived from our own domestic legislation."

In a statement today Social Democrats co-leader Catherine Murphy TD said the government’s sale was a case of selling off the family silver with no accountability to the people who bailed out the bank in the first place.

Deputy Murphy made her remarks as AIB shares price rose by 7 per cent in early trading within hours of going on sale.

“These shares went on sale at €4.20 which is the midpoint in the range. Within hours they were selling at much higher price, trading at €250m more than the government sold them for. If it turns out that we have sold these shares too cheaply, who is accountable for any lost income?

“The government has paid €41 million in fees to more than a dozen companies who have advised it on this flotation, who stand to gain either way. But in the meantime, the Irish people who pumped €21 billion into bailing out the bank will see little benefit from this sale as the proceeds will go to paying down debt by 1 per cent.

“In its head-long rush to sell off the family silver, the government never properly examined the case for holding onto these shares and investing the dividends in infrastructure. Instead, the decision was made to by-pass the Dáil and proceed with a sale that will make only a minuscule impact on our national debt.

“This sale comes in a week when the Minister for Housing admitted that the deadline to move homeless families out of hotels by July 1st will not be met. Many people will rightly feel that this is a government that has got its priorities all wrong.”

Mr Varadkar defended the fees paid, however, and said the price set for the sale of shares was a good one.

He told RTE: "The market sets the price, and the market has set a very good price. As a result of that AIB is valued at €12 billion."

"If you take into account the money we can recover from all the shares and also other means such as dividends, preference shares and the bank levy, we now expect we can cover about €20bn from AIB.

"When the entire process is completed and all the shares are sold what that means is we’ll be able to recover all of the money that was invested in AIB during the financial crisis in addition to all the money invested in Bank of Ireland.

"We’re in a very different position than we were in three or four years ago when we thought the bank bail out was going to cost €65bn.

"It looks like it’s going to cost now something closer to half of that."

Earlier in the day Bernard Byrne, chief executive of AIB, said the sale marked a landmark day for the bank and put the total cash paid to the state since its bailout to almost €10 billion euro.

"The level of investor interest and support for AIB and Ireland is a great vote of confidence in the strength of the turnaround in the bank and the wider economy.

"It paves the way for the full recovery of the investment in AIB, over time, as we return to full private ownership."

Fianna Fáil Spokesperson on Finance Michael McGrath also welcomed the successful flotation.

“As well as receiving €3.4bn for just less than 29% of the bank, the State now has a proper valuation for its remaining 71% shareholding. There is now a real prospect of the State recouping over time the full €20.8bn investment in AIB, a prospect which in my view supports the decision to rescue AIB in the first place back in 2008.

Mr McGrath said today was not a day for celebration however.

"The ordinary shareholders who lost everything in the banking collapse of 2008 should be remembered. In addition, the enormous sacrifices imposed on the Irish people as a result of the banking collapse have to be recognised.

“It remains Fianna Fáil’s view that the Government should be seeking greater flexibility from the European Union on the use of these proceeds. Given the collapse in capital investment levels under Fine Gael, it is our view that at least some of the proceeds should be earmarked for investment in the economy. It is deeply regrettable that the Government hasn’t even made this case in Europe.

“The Government may be tempted to sell more of the State’s shareholding in our banking system on the back of today’s flotation but this is not something we support at this time, particularly in view of the Government’s failure to secure any concession on how the proceeds would be used.

“It is our view that the State should hold a majority shareholding in AIB for the foreseeable future. We are also concerned at reports that the bank intends to sell loan portfolios to so called vulture funds.

“Personal borrowers and SMEs continue to pay over the odds for their loans in Ireland. The return to profitability for the banks has been secured on the backs of these customers. The government now needs to focus on attracting more competition into our banking system and delivering a better deal for consumers,” Mr McGrath concluded.

Reporting: Digital desk and PA