Scale of Irish banking bailout revealed

Several generations of Irish citizens are to pay the cost of bailing out Ireland’s bankers and developers following the crash in the state’s financial sector, the 26-County Minister for Finance Brian Lenihan revealed today.

New figures reveal the scale of the mismanagement and malfeasance at Anglo Irish Bank and other Irish financial institutions is significantly worse than had been feared.

A further thirty billion euro is to be required to bail out the five different financial institutions.

Minister Lenihan said he was providing more than another eight billion euro to Anglo Irish Bank immediately, and stunned the Dublin parliament when he revealed that another ten billion would shortly be injected into the scandal-hit institution. Four billion had already been transferred onto the bank’s balance sheet by the taxpayer.

Few details have yet emerged of the underlying finances of the bank, which has already been nationalised and which is currently the subject of a criminal investigatios.

Mr Lenihan said a wind-up of Anglo Irish Bank would have cost 70 billion euro and would have led to a “fire-sale” of assets, which would have further reduced proerty prices.

Minister Lenihan also announced he is taking over the EBS and Irish Nationwide building societies -- adding the latter has no future as a standalone entity and should be sold off or merged with another institution.

Allied Irish Banks is to be required to raise a further eight billion euro with the help of the state, and is likely to become majority owned by the Irish taxpayer.

Minister Lenihan’s announcement came as the National Assets Management Agency, which is taking control of most of the banks’ bad debts on behalf of the state, announced that, on average, a write-down of 47% is to be applied to the value of the loans purchased from the banks.

It was stated that the initial wave of more than 1,200 property loans, with a nominal value of 16 billion euro, had been acquired for 8.5 billion euro.

The agency said it anticipates that in total it will purchase 81 billion euro of loans.

It remains unclear what is planned for the ‘distressed assets’ which are the subject of the loans. Some developments and new housing estates have been targeted for demolition in a bid to shore up property prices, particularly in rural areas.

In a related development, administrators were today appointed to the state’s largest insurance company, Quinn Insurance, after the Financial Regulator said he had “very serious” concerns about the company’s ability to meet its liabilities.

The regulator said it had discovered that subsidiaries of Quinn Insurance had made guarantees in relation to the group’s assets which reduced the amount of cover for policyholders’ liabilities at the company.

This had had the effect of reducing the insurer’s assets by 448 million euro and “wiped out” the company’s solvency cushion, which now had an excess of liabilities of more than 200 million euro, the High Court in Dublin heard today.

In the Dublin parliament, Fine Gael’s Richard Bruton and Labour’s Eamon Gilmore said they were appalled at the cost of the government’s bank bailout plan.

“The decisions that were taken today will at one stroke double the national debt,” said Deputy Bruton, Fine Gael Finance Spokesperson.

“It is of truly horrendous proportions what the Government is asking us to decide today.”

Labour Party leader Gilmore said the total figure for the bailout at “close to 40,000 million euro” was “more than three times the income tax take for a full year.”

Sinn Fein Finance spokesperson Arthur Morgan said the Dublin government has no authority to further re-capitalise the banks.

Deputy Morgan said, “We are calling on the Government to give the people their say. The people are the largest stakeholders in this decision yet they have been given no say.

“The Government is making a decision today that will impact hugely on generations to come at a time when their support levels are at a record low and it is clear that the people do not support their economic strategy.

“I am therefore calling for an immediate General Election to let all the respective parties put forward their economic plans and let the people have their say on the way out of this mess.”

Urgent Appeal

Despite increasing support for Irish freedom and unity, we need your help to overcome British and unionist intransigence. We can end the denial of our rights in relation to Brexit, the Irish language, a border poll and legacy issues, with your support.

Please support IRN now to help us continue reporting and campaigning so that justice prevails. Even one pound a month can make a big difference for us.

Your contribution can be made with a credit or debit card by clicking below. A continuing monthly donation of £2 or more will give you full access to this site. Thank you. Go raibh míle maith agat.

© 2010 Irish Republican News