Final Anglo bill set at €29.3bn as deficit soars to 32%

Final Anglo bill set at €29.3bn as deficit soars to 32%

Anglo Irish Bank is expected to cost taxpayers €29.3bn, it was revealed today.

The Central Bank said another €5bn may need to be poured into the nationalised rogue lender in a “stressed scenario”.

Allied Irish Bank will also need another €3bn on top of the funding it has already received through the banking bail-out, it was announced.

The Government said it was now likely that AIB would be majority state-owned.

Irish Nationwide Building Society, which is also under public control, needs another €2.7bn – bringing to €5.4bn the taxpayers’ cash injected into the relatively small lender.

The Government, European Commission and Irish Nationwide chiefs are in talks about its sale or takeover by another financial institution.

Finance Minister Brian Lenihan, said the costs were ``fully manageable'' under the Government's austerity measures.

“The overall level of State support to our banking system remains manageable and can be accommodated in the Government’s fiscal plans in the coming years,” he said.

“We must continue the fiscal consolidation we have embarked upon.

“This is the only course to follow if we are to ensure the future economic well-being of our society.”

The bail-out is expected to bring Ireland's deficit to a massive 32% of the value of the economy, or Gross Domestic Product, this year.

But Mr Lenihan insisted this was a one- off spike and that the country remained fully committed to cutting the figure to just 3% by 2014.

A four-year budgetary plan is to be published in early November to set out a pathway towards this target.

Mr Lenihan warned taxpayers that further “significant” measures will be needed next year – over and above already announced cuts – to reduce the country’s borrowing.

The clean-up of Anglo Irish Bank has already sucked €22.9bn out of the State coffers since it was nationalised early last year.

The independent analysis by the Central Bank found another €6.4bn will be needed, under normal circumstances.

The extra €5bn would be needed in a worst-case scenario where commercial property prices drop to 65% of their peak values and do not recover until 2020.

Senior bond holders will not be affected but subordinated debt holders – those who bought riskier debt in the bank – will have to share the pain, Mr Lenihan insisted.

The Finance Minister said any attempt to make senior bond holders suffer for their investment in the rogue lender would hit Ireland’s ability to borrow on international money markets.

Mr Lenihan also revealed that the National Treasury Management Agency (NTMA) would not hold any further bond auctions this year, delaying a return to the market until January.

Meanwhile AIB announced changes to its management structure this morning, with Executive Chairman Dan O'Connor and Group Managing Director Colm Doherty to depart the bank in a matter of weeks.

In a statement this morning issued to coincide with the Regulator's review of its capital requirements the AIB Board expressed its appreciation for the executives' contribution to the bank, "especially in recent times as the bank embarked on its recapitalisation and reorganisation".

Mr Lenihan later told RTÉ Radio that the estimated final Anglo bill would bring closure and suggested the Government would not step in again.

“Today’s announcement brings to a close the public response to this crisis,” he said.

“We have to bring closure to this matter and that is what we have done.

“Of course these figures are horrendous but they can be managed over a 10-year period and they will be managed in that way.”

Mr Lenihan also defended his policy not to let investors, known as senior bond holders who gamble on debt securities, take a hit for the bank going bust.

“We’re not telling the bank manager that we are going to default prior to asking for money,” he said.

“We have not been doing that as a Government. and the extensive national debate on this subject which has taken place in the last two years is taking place in a unrealistic context.

“This is a country which is highly dependent on international investment for jobs through the multinational sector, highly dependent on funding to keep the state going and highly dependent on international funding to keep the banks going.”

He went on: “The realistic policy of the Irish people is to rely on their own resilience which they have demonstrated in buckets and spades throughout this recession.

“We have seen that resilience. We have seen a huge adjustment in wages, in prices, in values of property.

“The people have accepted a great deal of this. The people realise that we operate in a competitive market place and the people realise if they rely on their strengths, if they make the necessary adjustments then Ireland can be a better place for our children in the future.

“The alternative to that is to pursue this policy of delusion, of blaming others and of not taking responsibility for ourselves as a nation and as a people.”

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