Tags: Ireland | Price | Bank | Bailout | EU

Ireland to Put Price on Bank Bailout as EU Presses

Wednesday, 29 Sep 2010 10:12 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Ireland promised to pin down the final cost of a crippling bank bailout on Thursday as European Union officials pressed it to tackle the bloc's worst budget deficit and stave off a Greek style meltdown.

Irish borrowing costs have climbed to euro lifetime highs and triggered jitters across Europe over the as yet unquantified bill the country will have to foot for stricken Anglo Irish Bank.

Prime Minister Brian Cowen was hailed internationally for taking early tough action to tackle Ireland's deficit but that goodwill has disappeared as the burden of dealing with the nationalized lender escalated.

"Ireland knows what it needs to do, starting with an ambitious fiscal restructuring plan, with concrete measures, in order to reach the targets it has set," Lorenzo Bini Smaghi, a member of the European Central Bank's executive board, told reporters in Milan.

"They know what they have to do, they have to do it quickly," he said.

Two years to the day that Cowen decided to guarantee Ireland's financial sector, forcing similar moves around the world, its banks are still dependent on ECB funding and investors remain in the dark about the final bill for winding down nationalized Anglo Irish.

The Irish Times reported the cost could rise above 30 billion euros ($40.4 billion), under a worst case scenario but would not be as high as a 35 billion euros figure cited by credit rating agency Standard & Poor's.

Foreign Minister Micheal Martin said investors would get the "definite picture" on Anglo Irish when the government unveiled its final costs for winding it down on Thursday.

Ireland has insisted the Anglo bill, which is expected to propel government debt to over 100 percent of GDP, will be manageable because it will be spread out over at least a decade.

Strangled

Analysts say Ireland's budget shortfall is a recurring problem and with growth faltering, the EU's economic affairs commissioner signaled Dublin needed to come up with a detailed plan for getting its budget under control by 2014.

"Identifying and adopting already now the measures that will over the next years make sure that debt remains on a sustainable path would provide additional clarity also to markets," Olli Rehn was quoted as saying in The Irish Times newspaper.

He reiterated that Ireland should not need to seek emergency financial aid from the EU and the IMF.

Analysts said Cowen had no choice but to spell out planned cuts, likely to further strangle a struggling economy and add to the threat of an early general election, to woo back investors.

"The market is calling the shots now," said Dermot O'Leary, chief economist with Goodbody Stockbrokers.

"Greece was forced to publish a detailed multi-year plan when they received assistance from the IMF/EU ... The market needs that kind of transparency from Ireland."

The premium investors demand to hold Irish 10-year debt over German bunds was steady at 470 basis points after hitting a fresh euro lifetime high of 475 points on Tuesday.

Traders said a price of up to around 35 billion euros to wind down Anglo Irish, or over 20 percent of GDP, had already been priced into Irish bonds.

Cement Truck

Ireland's parliament reconvenes later on Thursday after a 12-week summer recess and a crowd of around 500 people marched to the assembly building as part of European-wide protests against austerity measures.

Earlier on Wednesday, a man drove a cement truck emblazoned with the words "Toxic Bank Anglo" into the gates of parliament. Police removed the vehicle and the man was arrested.

The marchers, largely middle-aged and including some opposition MPs, chanted and sang but did not stay for long. Sean, a civil servant, came out on his lunchbreak to march.

"I'm just frustrated at the state the country is in," the 53 year old said.

He shrugged off news that the number of people claiming unemployment benefit fell by 5,400 in September, the first fall since February.

"Ask the people who are signing on the dole, people who had jobs 18 months ago. I'd say it's little comfort to them."

On the Internet, some people applauded the cement truck protest.

"More thought and planning went into that than anything the government has done for years. Hopefully this is only the start," wrote one.

© 2014 Thomson/Reuters. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 

You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved