Ireland Reveals Full Horror of Banking Crisis
EUROPE, 4 Oct 2010
Andrew Bushe and Roland Jackson – The Age
Ireland revealed the full horror of its financial crisis on Thursday [30 Sep 2010], saying massive debts run up by Anglo Irish Bank had threatened to sink the country.
The Central Bank warned that the state rescue of Anglo Irish could cost as much as 34.3 billion euros (46.6 billion US dollars) and will help push the public deficit to a record 32 percent of gross domestic product this year.
That would be the largest deficit for a eurozone member since the European single currency was created in 1999 and comes amid mounting investor concern about soaring levels of eurozone state debt.
Finance Minister Brian Lenihan laid bare the full extent of state bailouts for the troubled banking sector — the Anglo rescue bill alone equals the annual taxation revenues — and insisted Ireland was coming to terms with the “nightmare.”
“Anglo Irish developed to a size where its balance sheet, its annual turnover, was half the national wealth and it became in itself a systemic threat to the financial viability of the state,” Lenihan said.
“That particular nightmare the government has had to live with, the Irish people have had to live with, and I’ve had to live with since September 2008. We’re now bringing closure to that.”
The news emerged the day after protesters drove a cement mixer into the gates of the Irish parliament as part of Europe-wide demonstrations over austerity cuts that are aimed at getting the public finances back under control.
Anglo Irish was one of the banks that fuelled Ireland’s property boom but the banking sector was ravaged by the global financial crisis and a deep recession.
Leading banks became grossly over-extended in lending to the property market, especially to developers of commercial buildings.
Lenihan blasted the bankers. “The Irish people are entitled to be angry with the bankers that lent recklessly over a considerable period of time in the earlier part of this decade.”
He said it was “clear” some banks went to great lengths to conceal losses.
Lenihan said the collapse of Anglo Irish would have pushed Ireland into insolvency, in remarks redolent of the recent crises in Greece and non-eurozone country Iceland, both of which needed outside help.
He added that he will deliver a four-year budget plan in November to show how the government will fix the public purse.
European Union competition chief Joaquin Almunia welcomed the “clarity” regarding the state aid provided to the Irish banks.
Jean-Claude Juncker, the prime minister of Luxembourg who heads the eurogroup of finance ministers, said he believed Ireland can resolve the crisis without help from the European Union.
The Central Bank said the Anglo Irish bailout has cost about 29.3 billion euros and it could need an extra 5.0 billion euros under a worst-case scenario.
Another bank in difficulty, Allied Irish Banks, would need to raise an extra 3.0 billion euros by year-end. That move will mean that AIB will become majority state-owned.
A further 2.7 billion euros of state cash will be ploughed into the nationalised Irish Nationwide Building Society.
The government also announced that there will be no bond auctions for the rest of the year and that it was fully funded until June 2011.
Ireland is struggling to maintain investor confidence in its ability to control its huge public debt and deficit, amid similar fears over Italy, Greece, Portugal and Spain.
Lenihan said it was an “urgent” priority to strengthen the banks and boost investor confidence in the former Celtic Tiger nation, with Ireland “fully committed” to reducing its deficit below 3.0 percent of GDP by 2014.
European governments and the International Monetary Fund have set up a trillion-dollar war chest to help any eurozone state in fiscal trouble following the financial rescue of Greece in May.
Ireland was the first eurozone member nation to plunge into recession in 2008. It returned to growth in the first quarter but then shrank by a huge 1.2 percent in the second quarter, stoking fears it could slip back into recession.
_________________________
© 2010 AFP
This story is sourced direct from an overseas news agency as an additional service to readers. Spelling follows North American usage, along with foreign currency and measurement units.
Go to Original – theage.com.au
DISCLAIMER: The statements, views and opinions expressed in pieces republished here are solely those of the authors and do not necessarily represent those of TMS. In accordance with title 17 U.S.C. section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. TMS has no affiliation whatsoever with the originator of this article nor is TMS endorsed or sponsored by the originator. “GO TO ORIGINAL” links are provided as a convenience to our readers and allow for verification of authenticity. However, as originating pages are often updated by their originating host sites, the versions posted may not match the versions our readers view when clicking the “GO TO ORIGINAL” links. This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.