“CAN one bank bring down a country?” That was the stark question posed by the International Herald Tribune yesterday in reaction to the latest Anglo Irish Bank results.
The Government has been quick to point to any commentary in the international media which suggests it is taking the right approach to rectifying the fiscal or banking crises.
It has been much slower, however, to point to any negative commentary, and the international reaction to the Anglo losses was predominantly negative.
In a piece headlined “Support of Anglo Irish Bank strains Ireland”, the Herald Tribune asked if a crippled financial institution could actually push a country over the edge.
“Anglo Irish Bank, the midsize Irish lender whose profligacy has come to symbolise the excesses of the real estate bubble here, is doing its best to find out.”
The article went on to state that no other country, aside from Iceland, had suffered as severe a banking bust. It also acknowledged that Ireland “took the most direct route in tackling the problem” by recognising upfront the bad loans of its banks and transferring them to state agency NAMA.
But the Herald Tribune reported that this strategy was now “being called into question”, as Ireland’s credit rating suffers and its borrowing costs resume their upward trajectory.
“Ireland’s struggle to cope with its mounting bank losses could well be a harbinger for other parts of Europe and for the United States as stuttering economic growth and stagnant housing markets put further strain on bank balance sheets.”
Anglo has suggested, bar any additional unforeseen developments, the final bill to the taxpayer won’t go beyond €25bn. The Daily Telegraph said this estimate would “come as a relief in some quarters after Standard & Poor’s, the credit ratings agency, last week forecast a bill of as much as €35bn”.
However, the Financial Times suggested uncertainty remained as to the final bill.
“The uncertainty over the final bill for Anglo Irish was one of factors behind S&P’s decision to downgrade the rating on Ireland’s long-term government debt last week. It is also hurting other Irish banks that, together with Anglo Irish, this month have to refinance €25bn of term funding as the Government’s two-year blanket liability guarantee lapses.”
The Wall Street Journal said the terrible Anglo results had come “as concerns have been growing about Ireland’s ability to keep bailing out its banks, which are suffering from heavy loan losses as the country’s economy continues to struggle”.
But both it and the BBC pointed out that the European Commission will have the final say on Anglo’s future, with an announcement expected later this month.
© Irish Examiner Ltd. All rights reserved