The cost to the Irish government of propping-up the troubled Anglo-Irish bank could rise by €5bn to €30bn with an announcement expected on how the bank’s debt will be restructured.
Protests outside the Irish Parliament on 29 September added to the government’s woes as the cost of state borrowing grew to record levels, prompting comparisons with Greece before it was forced to seek support from the international community.
The Irish Government is pressing ahead with plans to transfer property assets held by Anglo-Irish to a National Asset Management Agency (NAMA). The remaining liabilities are likely to be held in an asset recovery bank, with a separate deposit bank formed.
On 29 September a two year blanket guarantee for deposit and bond holders, with the six lenders based in Ireland, will expire.
On 20 September the minister for finance announced that the deposit guarantee scheme for banks and building societies in Ireland would increase from €20,000 to €100,000 per deposit, per institution, in line with the European Union limit.
This week the credit ratings agency Moody’s downgraded the rating it applies to some of the bank’s debt on fears bondholders may not be insured against losses.
The ratings agency Standard & Poor’s estimated that the cost to the Irish government of guaranteeing investors in Anglo-Irish against losses could be as much as €35bn. The figure would be around a fifth of the country’s gross domestic product (GDP).
Markets in Europe were trading down again on 29 September affected by concerns over sovereign debt.
Irish Central Statistics Office data for 2009 said GDP at current prices was €160bn, with the Financial Times saying the government’s guarantees to the financial sector amounted to over €400bn.
© Fair Investment Company Ltd