Ireland revealed it faces a bill of up to 50 billion euros ($68 billion) to clean up its banks, equating to over 11,000 euros per head of a recession-weary population already reeling from savage government cutbacks.
By Padraic Halpin and Andras Gergely | Reuters.com
DUBLIN, Sept 30 (Reuters) – Ireland revealed it faces a bill of up to 50 billion euros ($68 billion) to clean up its banks, equating to over 11,000 euros per head of a recession-weary population already reeling from savage government cutbacks.
Unveiling the latest in a string of bank bailouts, Finance Minister Brian Lenihan promised on Thursday that Ireland had arrived at the endgame for dealing with massive property losses but warned years of pain lay ahead for taxpayers.
“We have to bring closure to this matter and that is what we have done today,” Lenihan, charged with picking up the pieces of Ireland’s property-fuelled “Celtic Tiger” economic boom, said.
“Of course these figures are horrendous but they can be managed over a 10 year period.”
Fears Ireland will follow Greece by turning to its European Union partners and the IMF for help abated, however, after Lenihan cancelled all bond auctions for the rest of the year, highlighting the fact that a growing but well-structured debt portfolio means there is no impending liquidity crisis.
The premium investors demand to hold Irish 10-year debt over benchmark German bunds narrowed to 457 bps, after hitting a euro lifetime high of 475 bps earlier this week. The cost of insuring Irish debt against default also fell. [ID: nLDE68T0RG]
Ireland still has to pay almost three times as much interest on new borrowings as Germany, however, reflecting the fact that the government’s budget deficit will blow out to 32 percent of Ireland’s economic output this year, more than 10 times EU’s 3 percent cap and by far the worst in the union.