Brian Lenihan: “It is an urgent and immediate priority to reinforce international market confidence…”

With, as Robert Peston put it, the Irish economy “hideously and perilously balanced between recovery and Armageddon” the Irish Finance Minister, Brian Lenihan, has confirmed that the Anglo Irish Bank bailout will cost between €29.3 billion and €34.3 billion.

Additionally

AIB and Irish Nationwide will also require more money from the State.

The development will push Ireland’s deficit to 32% for this year, according to the Minister for Finance.

AIB will need a further €3bn on top of existing State funds being converted into shares.

That is likely to push the Government’s shareholding to a majority stake potentially over 90%, but the bank will retain a stock market listing.

As the BBC report notes

AIB needs to raise 7.9bn euros by the end of year to comply with the rules on how much money it holds in reserve, in case of more trouble in the banking sector.

Ireland’s finance minister Brian Lenihan said on Thursday he had been advised that AIB would find it difficult to raise all this money through the open market and that the state would have to step in.

RTÉ has live coverage from the Dáil and Seanad.

And Robert Peston adds, “It is make or break for Ireland’s public finances.”

The cost of the rescue to Irish taxpayers, including earlier measures, lifts the deficit in Ireland’s pubic finances from a painful 12% of GDP to a staggering 32%.

Elsewhere it’s reported

In an interview with BBC Radio 4’s Today programme, Mr Lenihan said the support was vital as Anglo Irish was too big to fail.

“The bank had grown to half the size of our annual national wealth, so clearly the failure of a bank on that scale would do huge damage to the local economy here in Ireland,” he said.

As the Irish Times reports

Minister for Finance Brian Lenihan today warned that further austerity measures will have to be imposed after the Central Bank revealed the total cost of the bailout for Irish banks will be almost €50 billion.

The measures, which will be published as part of a four year budgetary plan in early November, are part of the Government’s commitment to reducing the deficit below 3 per cent of gross domestic product by 2014.

As the Irish Times’ Financial Correspondent, Simon Carswell, says

The repeated increases in the banking bailout costs since the Government blanket bank guarantee in September 2008 has shaken the financial credibility of the State and the mounting cost of State-owned Anglo in particular has driven up Government borrowing costs.

The purpose of today’s early morning pre-market announcements was to show, once and for all, how much the Irish banks are going to cost the State. Now the Government must prove to the international markets that it can cover the cost with the public finances in a dire state.

But most of the opposition are hardly in a position to complain, as noted in this BBC report from 2008, when the Dáil first passed the bank guarantee legislation

The Dáil sat until after 0200 BST, the latest sitting in three decades, to debate the legislation, finally backing it by 124 votes to 18, with only Labour opposed.

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  • Johnkingii

    Anglo Irish banks £34 billion has just killed off Irish unity as effectively as any Republican terrorist campaign if not more so

  • joeCanuck

    This time I have done the sums myself. That’s about 40,000 per family for one bank. Where are they going to get such a sum; presumably not from income tax?

  • the future’s bright, the futures orange

    I’m sure there are a multitude of taxes at their disposal – I guess corperation tax is worth a bob or two.

  • joeCanuck

    Yes, which is why I mentioned just income tax – the quickest and easiest to implement.
    No matter which taxation methods are used, however, the same people, the citizenry, pay for it all at the end of the day.

  • DC

    The Irish government is sailing close to criminal negligence territory here.

    That’s an unbelievable bailout.

    Are the people of Ireland just going to let this happen – a la croppy lie down style – things don’t just happen like some sort ‘act of God’ – they happen for a reason?

    Did Bertie Ahern ever get a bank account?

    Well if they can’t enact anything themselves I guess in today’s hyper-mobile society it is possible to do something productive – leave in millions.

    Perhaps it will only be the political cohort left behind and the odd banker or two. Maybe that group can pay for it – they did after all help get Ireland into this mess?

  • Alias

    The minister’s spin here is that a line has now been drawn in the sand. While that is true; unfortunately, the minister’s head is buried under it. The line (and said minister’s head) will be washed away in the second and third waves. The second wave will be when the banks can no longer hide defaulting loans on their books by classifying them as moratoriums, and when the economic cost of bailing-out the eurosystem impacts on business and employment. And the third wave will be when declining tax receipts mean that the state defaults on the eurosystem debts that it has converted into sovereign debt.

  • DC

    If the Irish people accept or can come to accept that economic capital is at the root of all other capital, political and cultural and so on then such figures are absolutely nationhood destroying.

    In essence, this sort of figure is more damaging to life expectancy and national security than probably 100 9/11 terrorist-style attacks were they to happen on Irish soil today.

    The point being, if they can seize terrorists’ assets and property without much ado then I reckon same goes for politicians and bankers who operated together hand in glove.

    Or is it only the so-called plebs and ‘low life’ criminals that get banged up and houses and assets stripped clean off them – and outside of terrorist acts – selling drugs and counterfeit goods and such likes? All of those criminal acts pale into insignificance beside this sort of bailout amount – yet nothing criminal to be seen here.

    Cue Vincent

  • The Raven

    My understanding of such things skirts pretty close to the edge of nothingness, and I tend to end up reading the hideous headline and nothing else, but this little piece from the Beeb coverage really made me feel quite queasy….

    “Mr Lenihan defended the cost of the bail-out measures, which will cost the Republic’s two million taxpayers the equivalent of 22,500 euros each.”

    How does a country with such a small number of people actually paying into the pot, keep going? How is it possible? And this is on top of whatever needs paying back already? I’m sure there’s a very qualified answer to this, but I just can’t get my head around such vast figures….

    And people have the nerve to take a potshot at the public sector?

  • Alias

    Well that’s not quite true. Remember that “the banks” (i.e. the shareholders in the Irish banks) lost their investment and have not been bailed-out. It is only eurosystem bondholders (and despositors) that are being bailed-out here. If the government bailed-out the shareholders in the banks (Irish pension funds, private Irish citizens, etc) then they would have less money available to give to eurosystem bondholders. In Anglo’s case, 82% of the depositors were foreign corporations so the EC included them under the category of systemic risk.

  • joeCanuck

    Bertie and the bank account.
    If you had known the real state of the banks down there, would you have deposited money?

  • DC

    Bailing out only shareholders whenever share prices were at 15 cents at collapse point might have been a far better option!

    Still doesn’t get round the responsibility issue.

    The knock on effect of this will be a free for all. What right does the state have to come for anybody if on the premise of the primacy of economic capital – yet it protects foreign investments foreign capital first but taxes the Irish citizen for that then tries to lift a hand on Irish drug dealers and other Irish crooks.

    I suppose finally the trite statement of the “law being an ass” comes to fruition – Irish style.

    The Irish State has completely lost its authority in my view.

  • Alias

    “The Irish State has completely lost its authority in my view.”

    In my view too, but probably for different reasons to you given that I am against EU rule and you support it.

    In my view the state derives its legitimacy from the nation with the state existing to protect and promote national interests. When it acts against the national interest then it acts against the people and thereby loses its legitimacy.

    However, the nation itself determined that its national affairs should no longer be determined by the state in its interests but rather determined by the EU in its interests. So while the state acts to betray the people the state only does so because the people have inserted a clause into their constitution that obligates the state to betray them. The right to self-determination includes the right to renounce the right to self-determination.

    Naturally, when the nation has renounced its right to determine its own affairs then those to whom it has transferred that right will determine those affairs in their interest. So the EC determines the policy and the state implements it. In this instance the EU has determined that it is not in its interest that its banks elsewhere in the EU should lose money as a result of their reckless lending to Irish banks, and so it has determined that the Irish state should act to contain those debts within its state by converting them into sovereign debt.

    There is obviously a conflict of interest between the interest of the Irish nation and the interests of German, French, et al, banks in that it is rather obviously not in the Irish national interest that the nation should be enslaved by retrospectively underwriting the losses suffered by those banks. It is however in the EU interest that that should transpire. As the Irish themselves gave their sovereignty in this area away then it should be no surprise that the conflict of interest is resolved by those to whom they gave their sovereignty away in their favour.

    Of course no EU official with a Hitler-like moustache is going to appear on RTE and demand this be done. Instead the Irish constitution demands that it be done because the Irish themselves have ratified the relevant treaties and made them a part of their constitution, so it is done via the Irish state – and again, rather obviously, it is done by the Irish state pretending that it is acting in the national interest of its own citizens rather than simply enslaving its own citizens because those citizens have constitutionally enslaved themselves by giving their sovereignty away.

    It will take a revolution to undo all of that…

  • Munsterview

    Dc
    “……The Irish government is sailing close to criminal negligence territory here……”

    Thats what the Haughey / O’Malley / Boland ‘do business and politics’ was all about, not just ‘sailing close’ but right through the mire.

    This is pure home grown golden circle, non regulation corruption, the likes of which if done in China would have most of the last quarter century of Fianna Failure Government members, tried, convicted and shot for corruption and economic sabotage of the State.

    However this being the Twenty-Six counties if there is an enquiry, it wall be another ten year,€ 25 million job…..hence no enquiry….we cannot afford it……neat or what!

  • Greenflag

    ‘yet nothing criminal to be seen here.’

    The main criminals are still alive and well and in Wall St in Bank of America , Goldman Sachs and Citi Group 🙁 They are still screwing the American middle class having of course first been restored to financial solvency by that same middle class who have now become the FMC (former middle class)

    Ireland to coin a phrase is very small potatoes in the world economy .Our politicians like the British and Americans and the Europeans are ALL terrifed of the international bankers and their recently seen capability to drive the entire world into economic chaos by virtue of their excessive greed and complete lack of social responsibilty .

    Consumers the world over need to STOP supporting these financial giants > The world needs new regulations outlawing usurious interest rates and bringing back the death penalty for cases of major financial fraud foisted on individuals , and countries !

    The Middle Ages punishment for usury was I believe flaying alive . . Perfect justice then for the financial sector criminals -i.e taking the skin off their backs for their as one enthusiastic hedge fund manger put it — ripping the faces off their clients – and looting pension and retirement funds !

  • Greenflag

    The USA is not in the EU . It’s middle class is in even a worse state than Ireland’s.

    The UK is not in the Euro Zone . Who’s economy is doing better now the UK or Germany’s ?

    How many countries are lining up to join the Euro . Poland becomes a member next year and Estonia and others are in the queue .

    Nice touch the ‘Hitler like ‘ moustache . It’s just as well we have the EU otherwise this Wall St and USA provoked economic crisis might have spurned a dozen modern Hitlers or more all across Europe 🙁

    Ireland has had it’s first ‘property bust bubble ‘ built on the excessive greed of our bankers and developers and aided and abetted even if in most cases unkowingly by the financial and economic ignorance of our politicians . No different than the UK or USA except the former has experience of many recessions in it’s history while the latter USA has been in thrall to the neo conservative economists and right wing fanatics who have made their country’s financial future and the strength of it’s dollar dependent on Chinese ‘savings’ .Meanwhile the Chinese now control the production and supply of some 97% of the world’s rare earth minerals which are critical in high tech applications and scientific research . The Chinese under Deng planned ‘dominance’ in this field some 30 years ago . American long term planning of any kind seemed to come to a full stop with Kennedy’s ‘moon landing ‘ by the end of the decade objective .

    We want it now and short term greed at the expense of society at large is the nightmare on the other side of the american dream . Spending more on weapons and armaments than the rest of the world combined and using up 25 % of the world’s energy with 5% of the world population while exporting jobs abroad and having 40 million on food stamps at home and 48 million uninsured with 3 million in prison and with 8 million foreclosed properties -is when you add it all a tough act to follow for any budding ‘democracies out ther who may wish to follow the USA example instead of the say the Chinese or Swedish examples !