Ireland Is 'Punished' for Honesty About Banks: Official

Ireland is being punished for coming clean about the state of the Irish banking industry, Brian Lenihan, the Irish Finance Minister told CNBC in an interview Thursday.

Dublin, Ireland
Dennis Flaherty | Photographer's Choice RF | Getty Images
Dublin, Ireland

“We are being punished because we have exposed our dirty linen on the banking front," Lenihan said.

"We've made no secret of it. Because I believe the quicker we bring that out, the quicker we bring resolution to our banking difficulties, the quicker confidence will restore and be returned to the country,” Lenihan said following the decision to split nationalized lender Anglo Irish in two and wind down its loan book.

Lenihan dismissed fears over funding problems for the Irish banks, saying the Anglo announcement “was the first in a series of announcements. The EC has cleared the way for guarantees, there is no funding cliff for Irish banks.”

Lenihan says he took issue with S&P following their decision to downgrade the Irish credit rating recently.

He said the assumption in the negative outlook was that there was no residual value in the loans the government has taken over.

"We paid 42 percent or even 72 percent discounts on loans we have bought and to say there is nil value in those loans is wrong,” Lenihan said.

Economy ‘Stabilized’

The Irish economy has stabilized well following a big drop in gross domestic product in 2009, he said.

“The problems facing Ireland were rising asset prices, rising prices and rising wages. This has been reversed making Ireland more competitive, hence we returned to growth in the first quarter,” Lenihan added.

Lenihan admits a return to strong growth is going to take time but is happy that growth has stabilized at a time when his coalition government is making big cuts in government spending.

The International Monetary Fund has questioned whether Ireland can get its budget deficit down to 3 percent of GDP by 2014, predicting it will reach 5.8 percent.

“The IMF share our view that the Irish economy is heading in the right direction,” Lenihan said.