Ireland put the cost of bailing out Anglo Irish Bank at €34bn (£29bn), lifting the country's budget deficit to a massive 32 per cent of GDP as it attempts to draw a line under a crippling banking crisis.
reland's central bank said the extra cost of bailing out the banks - Allied Irish Banks and building society Irish Nationwide also need more capital - would force the government to make further budget cuts.
Irish borrowing costs have hit record highs and triggered jitters across Europe as investors worried about the final bill for bailing out the banks and the ability of the country to push through the austerity measures needed to cut its massive debts.
Brian Lenihan, the Finance Minister who has warned that the failure of Anglo Irish Bank would “bring down” the whole country, said Dublin would aim to slice more than an existing target of €3bn off its 2011 budget.
He said he would also outline a four-year plan in November to get its shortfall to below 3pc of GDP by 2014.
European Union officials had pressed Dublin to come up with a detailed plan for getting its fiscal gap - the worst in the bloc - under control within five years.
The country has so far ploughed €29.5bn into Anglo Irish Bank, and the country's Central Bank said on Thursday the lender could need an additional $5bn under a worst-case scenario.
“The market had come to expect the Anglo Irish figures,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin, told Bloomberg. “The surprise here is Allied Irish.”
Allied Irish Banks will need to raise an additional €3bn by the end of the year. Support for Irish Nationwide will rise to €5.4bn from €2.7 bn.
The bailout of the banks is the equivalent of 20pc of GDP.
Mr Lenihan said the bank costs would be spread over more than 10 years but said Ireland was likely to take a majority stake in Allied Irish Banks, because it would not be able to conduct a privately underwritten capital raising transaction.
The government is hoping the concerns of debt investors will have been eased now that it has quantified the full cost of bailing out the lender and laid out further measures to bring its public finances under control.
“Today’s announcements take the Irish banking system closer to a final resolution of its restructuring, which is a prerequisite for sustained economic recovery,” Partick Honohan, the Governor of the central bank, said.
"At €30bn, the cost of the bail-out is very similar to the annual Irish tax take," said Jane Foley, senior foreign-exchange strategist at Rabobank.
"It follows that there is no quick fix to the appalling state of Irish government finances," she said.
The extra yield investors have demanded for the risk of holding 10-year Irish bonds over equivalent German bunds eased in early trading on Thursday to 4.37 percentage points.
However, it still remains closed its all-time high of 4.49 percentage points hit this week.
Standard & Poor’s, which cut Ireland’s credit rating in August, had estimated that Anglo Irish’s bailout may cost €35bn. It is keeping a close eye on the country's debt and has warned it could downgrade further.
Europe's leading stock markets retreated at the start of trading on Thursday, with London's benchmark FTSE 100 index losing 0.47 percent to 5,543.35 points. Frankfurt's DAX 30 shed 0.53 percent to 6,214.02 points and in Paris the CAC 40 decreased by 0.68 percent to 3,711.96 points.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8033960/Ireland-faces-34bn-bill-for-Anglo-Irish-Bank-forced-to-redraft-budget.html
reland's central bank said the extra cost of bailing out the banks - Allied Irish Banks and building society Irish Nationwide also need more capital - would force the government to make further budget cuts.
Irish borrowing costs have hit record highs and triggered jitters across Europe as investors worried about the final bill for bailing out the banks and the ability of the country to push through the austerity measures needed to cut its massive debts.
Brian Lenihan, the Finance Minister who has warned that the failure of Anglo Irish Bank would “bring down” the whole country, said Dublin would aim to slice more than an existing target of €3bn off its 2011 budget.
He said he would also outline a four-year plan in November to get its shortfall to below 3pc of GDP by 2014.
European Union officials had pressed Dublin to come up with a detailed plan for getting its fiscal gap - the worst in the bloc - under control within five years.
The country has so far ploughed €29.5bn into Anglo Irish Bank, and the country's Central Bank said on Thursday the lender could need an additional $5bn under a worst-case scenario.
“The market had come to expect the Anglo Irish figures,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin, told Bloomberg. “The surprise here is Allied Irish.”
Allied Irish Banks will need to raise an additional €3bn by the end of the year. Support for Irish Nationwide will rise to €5.4bn from €2.7 bn.
The bailout of the banks is the equivalent of 20pc of GDP.
Mr Lenihan said the bank costs would be spread over more than 10 years but said Ireland was likely to take a majority stake in Allied Irish Banks, because it would not be able to conduct a privately underwritten capital raising transaction.
The government is hoping the concerns of debt investors will have been eased now that it has quantified the full cost of bailing out the lender and laid out further measures to bring its public finances under control.
“Today’s announcements take the Irish banking system closer to a final resolution of its restructuring, which is a prerequisite for sustained economic recovery,” Partick Honohan, the Governor of the central bank, said.
"At €30bn, the cost of the bail-out is very similar to the annual Irish tax take," said Jane Foley, senior foreign-exchange strategist at Rabobank.
"It follows that there is no quick fix to the appalling state of Irish government finances," she said.
The extra yield investors have demanded for the risk of holding 10-year Irish bonds over equivalent German bunds eased in early trading on Thursday to 4.37 percentage points.
However, it still remains closed its all-time high of 4.49 percentage points hit this week.
Standard & Poor’s, which cut Ireland’s credit rating in August, had estimated that Anglo Irish’s bailout may cost €35bn. It is keeping a close eye on the country's debt and has warned it could downgrade further.
Europe's leading stock markets retreated at the start of trading on Thursday, with London's benchmark FTSE 100 index losing 0.47 percent to 5,543.35 points. Frankfurt's DAX 30 shed 0.53 percent to 6,214.02 points and in Paris the CAC 40 decreased by 0.68 percent to 3,711.96 points.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8033960/Ireland-faces-34bn-bill-for-Anglo-Irish-Bank-forced-to-redraft-budget.html
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