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.


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.