State could recoup bailout funds

THE Government may try to transfer part of the €62 billion cost of bailing out its banks to the euro region’s rescue fund should policymakers allow the facility to buy stakes directly in lenders, three people with knowledge of the matter said.

The state may seek to recoup a portion of the €20.7bn it spent bailing out Allied Irish Banks from the European Financial Stability Facility (EFSF), said two of the people, who declined to be identified because no decision has been made.

Finance Minister Michael Noonan has indicated he may use the EFSF to replace some of the €29bn the government provided Anglo Irish Bank, the first to be nationalised.

Three years after guaranteeing its banks, a decision that forced Ireland to seek an international bailout last year, officials want the country to benefit retroactively if EU policy makers expand the EFSF’s remit to invest directly in banks. Mr Noonan has said Irish banks don’t require additional capital.

“The aim seems to be to put the fund to use for European banks that need fresh capital,” said Colm Ryan, head of fixed income at Goodbody Stockbrokers in Dublin. “Ireland may be able to refinance” Anglo Irish, he said. “Given Ireland has already recapitalised its banks, I don’t think it would be so easy to tap the fund to replace capital that has already gone into other banks.”

The International Monetary Fund said last month that it estimates Ireland’s general government debt will peak at 118% of gross domestic product in 2013, equivalent to almost €200bn . That’s up from 25% of GDP in 2007.

A Department of Finance spokesman said yesterday Ireland is “considering all options.” Mr Noonan said he has been “positioning a re-negotiation of the costs” of bailing out Anglo Irish. Still, there have been no talks on whether “we can get back in the game retrospectively,” he said.

Ireland injected €46bn into its banks before receiving €85bn in a bailout led by the IMF and EU last year. The state then injected a further €16.5bn into the banks.

“There is no sign yet that there will be a softer deal anywhere else with the exception of Greece, whose banking system is in much difficulty,” said Noonan.