Lenihan: Anglo will not bring down country

FINANCE Minister Brian Lenihan has insisted nationalised Anglo Irish Bank will not be allowed to bring down the country.

He wants to extend the state’s guarantee on bank borrowing to ensure the country’s three main banks, Allied Irish, Bank of Ireland and Anglo, can borrow the €25 billion they need to keep going this month.

The minister asked EU Competition Commissioner Joaquin Almunia to agree the extension in a 90-minute meeting in Brussels during which the country’s financial system and the future of Anglo were put under the microscope.

Before the special meeting he was asked by RTÉ, in relation to Anglo, if one bank could bring down a country and he replied: “Yes. It’s an entirely reasonable question and we’ve had to live with this danger since September 2008.”

Mr Lenihan said the decision on the future of Anglo will be based on “what is best for the taxpayer in terms of the risks to the country’s solvency”.

He added if the best option was to wind down the bank, “then so be it”. The costs were manageable and it would not bankrupt the country, he said.

But banking experts have warned decisions on the future of Anglo, into which the state has already pumped over €23bn, must be made immediately.

Kevin Newman, a Brussels-based EU policy and banking expert, said the state was paying well over the odds even for short-term borrowing because of the market’s fears for the Irish economy.

And he did not believe Anglo and AIB would be able to raise the kind of money they need to finance debts this month, if the state guarantee on short-term corporate debt is not extended for another three to six months.

“With Anglo Irish, they need to reach an agreement this week. They do not have the luxury of time,” he said.

Ireland is the only country seeking to extend the state’s bank guarantee on short-term loans of up to three months, as the other 16 countries with such schemes agreed to scrap them this month.

The Government is likely to make a decision quickly on whether to go with its original proposal to keep 20% of Anglo as a “good bank” or to wind down the entire operation over a number of years as the Commission and the opposition political parties prefer.