Ireland tops budget crisis as bankers empty vaults

The budget deficit of the 26-County state is now the highest in the euro zone, according to the latest figures from the European Union, outstripping near-bankrupt Greece to become the state facing the greatest budgetary crisis in Europe.

After the EU reclassified a 4 billion euro injection into the fraudulent and corrupt Anglo Irish Bank as government spending, Dublin’s deficit is currently 14.3 per cent of gross domestic product in 2009, more than four times the EU’s 3 per cent deficit limit. Greece is currently facing a 13.6 per cent budget deficit.

The EU had forecast a shortfall of 12.5 per cent in November. Minister for Finance Brian Lenihan dismissed the news, insisting it was due to a “technical reclassification” and not an indication of the Dublin government’s mishandling of the economy.

“This is a once-off impact, and will not affect the Government’s stated budgetary aim of reducing the deficit to below 3 per cent of GDP by 2014.”

The cost of government borrowing increased on the news due to the perceived elevated risk of the state being unable to meet future repayments.

The 26-County administration last month said Anglo Irish may need a further 18.3 billion in additional capital. It also continues to pump money into Ireland’s two largest failed banks, Bank of Ireland and AIB.

Ireland’s debt now stands at 64 per cent of GDP last year from 44 per cent in 2008.

Labour Party spokeswoman on finance Joan Burton said the figures corrected the government’s accountancy tricks.

“The government describes the upward revision of Ireland’s deficit from 11.8 per cent to 14.3 per cent of GDP as merely technical re-classification of the 2009 general government deficit. This is a breathtaking attempt to airbrush out of economic history the financial consequences of the 4bn euro injection into Anglo Irish Bank,” she said.

“From being one of the least indebted countries in Europe, Ireland is now well on its way to being one of the most indebted, especially when the impending mass issue of Nama bonds is factored into the equation.”

Fine Gael’s finance spokesman said the impact of today’s news was “very serious”.

“It means that if the Government is to meet its 3 per cent budget deficit figure by 2014, as agreed with the European Commission, it will have to find significant additional savings,” he said.

“With an estimated 21 billion euro to be pumped into Anglo and INBS over the next ten years, the government will have to find an average of 2 billion euro in extra savings each year for the next four years just to meet their own targets.

“To put that into context, the total savings made last year from public sector pay cuts was just over one billion euro.”

COWEN ‘COMPLICIT’ IN

Continuing appropriations of six- and seven-figure sums by disgraced senior bank officials as ‘bonus’ and ‘top-up’ payments has continued, despite public outrage over the 26-County economic collapse and the hugely expensive state bailout of the banks

Opposition Fine Gael leader Enda Kenny claimed bankers were “thumbing their nose” at the Dublin government and treating the Taoiseach and his office with “utter disrespect”, because of his “complicity” when he was minister for finance.

Mr Kenny said the Government seemed “powerless to stand in the face of the juggernaut of bankers at senior level and the manner in which they have got their way”.

Mr Kenny had highlighted the 221,000 euro paid to Michael Fingleton in his last four months as chief executive of the Irish Nationwide Building Society, and a one million euro bonus he previously obtained.

His successor at the now state-owned institution this week described Fingleton’s speculative practices as “outrageous”.

Mr Kenny was difficult for public service workers to understand that they were being asked “to take pain in the national interest... when they see a small number of people deriving massive benefits to which they could never aspire”.

But Mr Cowen insisted the Government was “activating positively and proactively to try to ensure it fixes the system in which it is clear there have been systematic institutional failures with regard to the banking crisis”.

Public outrage appeared to play a part in Bank of Ireland chief executive Richie Boucher’s decision to forgo his 1.45 million euro ‘pension top-up’. Despite being part of the management that drove the bank to the point of bankruptcy before the state bailout, Boucher secured the payment as part of an early retirement plan.

Cowen had said that it would be helpful “in public perception terms” if he did not accept it.

Meanwhile, Sinn Fein’s finance spokesman Arthur Morgan has called for clarification on the role of the two ‘public interest’ directors on the board of Anglo Irish Bank.

False annual accounts showing a profit for 2008 were subsequently endorsed by at least one of those appointed.

“The truth emerged some months later when we were told the bank had 12.7 billion euro in losses. How did this come about?

“Why is it not considered a scandal that a supposedly accountable bank published incorrect accounts which were signed by at least one of the public interest directors, Mr Frank Daly?”

Mr Morgan said that at a time when pensioners were having their Christmas bonus cut, those on low wages had a levy imposed on their salaries and welfare recipients had their income cut, Mr Daly was appointed chair of the board of NAMA as a “reward”.

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