x Abu Dhabi, UAEWednesday 26 July 2017

Latest Irish bank rescue pushes cost towards €50bn

Government weighing bill of taking a controlling stake in one bank and bailing out another to rescue Ireland's financial system from collapse.

Rescuing Ireland's financial system from collapse could cost as much as €50 billion (Dh250.6bn) as the government weighs taking a controlling stake in one ailing bank and bailing out another. 

This would raise the final bill for bailing out Ireland's banks to the equivalent of €11,500 for each person in the country. The Irish government is preparing to take majority control of Allied Irish Banks and inject extra cash into Anglo Irish Bank.

"The Irish banking system is at rock bottom today," Brian Lenihan, the finance minister, said in a Bloomberg Television interview in Dublin. But Mr Lenihan denied the banking system needed external financial support after investor worries that the country would follow Greece in using the €750bn emergency fund set up by the EU and IMF to back troubled economies. Ireland's moves could bring the total cost for restoring the country's financial system to between €45bn and €50bn, figures from the country's finance ministry and central bank show. Allied Irish may need as much as €3bn.

Bank of Ireland and Irish Life & Permanent are the only big Irish banks still independent of government control after the bailouts. Anglo Irish has received €22.9bn of state support since the government intervened in January last year to ease the lender's exposure to the country's property crisis. Mounting financial outlays to support banks led Standard & Poor's in August to downgrade Ireland's credit rating.

In another reminder that the woes of European economies are far from over, Moody's Investors Service yesterday downgraded Spain's debt rating one notch to "Aa1" from "Aaa". The credit agency cited Spain's "weak" economy for its action. Dominique Strauss-Kahn, the managing director of the IMF, yesterday warned the financial crisis was not over. "There's no reason to believe that all the problems are behind us," Mr Strauss-Kahn said in Brussels.

Ireland needed to outline proposals for cutting its budget deficit, he said. 

* with Bloomberg 

tarnold@thenational.ae