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Rescue packages tap pension fund reserves

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  • Rescue packages tap pension fund reserves

NORWAY/IRELAND - The governments of both Norway and Ireland have announced plans to draw money from their national pension reserves for fiscal stimuli early next year.

Jens Stottenberg, Norway's left-wing prime minister, has unveiled additional spending measures targeting those sectors sharpest hit by the downturn, such as building and infrastructure, to be funded by Norway's NOK1.947trn (€245bn) Government Pension Fund - Global.

Simultaneously, the Irish department of finance today said it might finance an estimated €10bn recapitalisation of financial institutions via its €18.7bn National Pensions Reserve Fund (NPRF).

"The National Pensions Reserve Fund Act, 2000 will be amended, as necessary," the department said in a statement.

A spokeswoman for the Norwegian premier declined to comment how large the package would be, but said it would come on top of the earlier announced expansionary budget for 2009.

Norway uses oil revenues to finance its non-oil budget deficit and invests the rest overseas via its Global Pension Fund, commonly referred to as the Oil Fund.

The terms of the fund restrict the amount the government can spend at home to around 4%, though the fund's guidelines allow fiscal policy to be used actively to support economic growth.

The Irish department of finance also said in a statement: "The government has decided either through the National Pensions Reserve Fund or otherwise and subject to terms and conditions, to support, alongside existing shareholders and private investors, a recapitalisation programme for credit institutions in Ireland of up to €10bn."

Unlike many other European countries, Ireland has not yet bailed out or nationalised any banks, while the banks have not raised equity themselves.

This latest decision comes after shares in Anglo Irish Bank plummeted to as low as €0.31 on Friday amid continuing weak investor sentiment.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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