State readies itself for €77bn NAMA gamble

THE process of saddling the taxpayer with €77 billion of high-risk property and development loans will begin next month following EU approval for the Government’s bank bailout scheme.

The European Commission yesterday gave its blessing to the National Asset Management Agency (NAMA), saying it was “key” to cleaning up the banks’ balance sheets and returning the financial market to full health.

However, there was further bad news on the jobs front with the announcement that Postbank, which operates in about 1,000 Irish post offices, is to pull out of the country by the end of the year.

The company, which has 170,000 customers and employs about 260 people, said it was a commercial decision and said it hoped most of the jobs can be saved.

Finance Minister Brian Lenihan welcomed the commission’s endorsement of NAMA, and said the transfer of the first tranche of loans – held by the country’s 10 biggest developers and amounting to some €17bn – should begin next month.

The Government’s hope is that by relieving the banks of the high-risk loans, they will be able to resume lending to businesses and help lift the economy.

Speaking at the annual dinner of the Irish Taxation Institute last night in Dublin, Mr Lenihan also announced his intention to secure a €3bn cut in the national deficit next year, with €1bn to come from the capital budget and the rest to come from cuts to public spending and reform of the tax system.

Fresh Central Bank data showed a further 4.3% fall in lending to business last month – indicating the banks’ reluctance to lend in their current impaired state.

But the opposition warned that NAMA would neither stimulate the economy nor save a single job.

“Even when NAMA starts purchasing toxic developer loans with taxpayers’ money at inflated prices, both the IMF and the banks themselves have confirmed this is unlikely to have any material impact on credit conditions facing struggling businesses,” said Fine Gael finance spokesman Richard Bruton.

“This is because the overriding imperative of the banks in the coming years will be to use the NAMA money to improve their own financial positions. This means paying down their own loans from international markets rather than financing new lending to businesses.”

Labour finance spokeswoman Joan Burton was also critical of the plan.

“It is now up to the public servants involved in the NAMA process to ensure a robust valuation process that doesn’t leave taxpayers exposed to billions in losses,” she said.