With US banking giant Citygroup on the brink while publicly protesting it has sufficient assets, the same applies writ small to Irish-owned banks. The Sunday Times, with its greater distance from the Irish fray accuses them of covering up the worst, but theyre not alone. The whole Dublin establishment, politicians, business and media are trying to contain a crisis which as elsewhere has exposed the fact that with world bank lending in freeze, state guarantees to banks are not enough. The choice, debated in Irish Times correspondence seems to lie between the disappearance of independent Irish banks altogether and state recapitalisation and mergers. The banks vulnerablity cant be doubted.
Note that the banks’ assets are highly concentrated in “fast-fading” UK and Irish property, said Lex in the FT. At Anglo-Irish Bank, the exposure to these two sectors is 80% and at Bank of Ireland and Allied Irish it is 71% and 60% respectively. And if markets keep withholding wholesale funds from “property plays”, then the government “may have to reconsider that guarantee”.
But if the UK and even the US states are finding state recapitalisation difficult to swallow, what are the prospects for a small state like Ireland taking the burden on? While Bertie acts as go-between , the Republic is bracing itself for a new economic plan. But room for manoeuvre looks very tight. With Budget rows still smouldering, by how much can they lower taxes to attract fresh foreign direct investment without causing social upheaval, on top of the existing political turmoil?
Former BBC journalist and manager in Belfast, Manchester and London, Editor Spolight; Political Editor BBC NI; Current Affairs Commissioning editor BBC Radio 4; Editor Political and Parliamentary Programmes, BBC Westminster; former London Editor Belfast Telegraph. Hon Senior Research Fellow, The Constitution Unit, Univ Coll. London
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