Don't miss

Replay


LATEST SHOWS

EYE ON AFRICA

25 years of independence in Eritrea : Thousands continue to flee the repressive regime

Read more

MEDIAWATCH

Petrol shortages in France and free hugs in Britain

Read more

MEDIAWATCH

Petrol shortages in France and #HugABrit

Read more

THE DEBATE

Obama in Vietnam: Just how close can Washington and Hanoi become? (part 1)

Read more

THE DEBATE

Fuel on the fire: French unions block refineries to protest labour reform (part 2)

Read more

ENCORE!

Music show: Judith Owen, Eric Clapton and Ariana Grande

Read more

FOCUS

Video: Christian NGO brings Syrian refugees to Italy

Read more

IN THE PAPERS

'Near miss' for Austria and the EU

Read more

IN THE PAPERS

#hugabrit

Read more

Our Focus programme brings you exclusive reports from around the world. From Monday to Friday at 7.45 am Paris time.

FOCUS

FOCUS

Latest update : 2010-09-28

The bank that nearly brought down an economy

The collapse of Anglo Irish Bank is going to cost the Irish taxpayer up to 35 billion euros. What does this portend for the embattled Irish economy?

 

Can one bank bring down a country? In Ireland the situation is so serious that the whole of Europe has been asking just that.
 
A medium size lender, Anglo Irish Bank, collapsed when the property bubble burst two years ago and had to be nationalised. The bank has already cost the Irish taxpayer more than 25 billion euros.
 
Ireland has since been downgraded twice by credit rating agencies, and thanks to this bank it has the highest deficit in Europe at more than 20% of its Gross Domestic Product (GDP).
 
Anglo Irish will be banned from new lending and split into a savings bank and an asset recovery vehicle in the medium term, in preparation for its closure. The heads of the bank and the Irish government had initially wanted to keep it half-open in order to try to save some of the assets, if and when the property market recovered.
 
But The European Commission said no: Anglo Irish Bank has to go as quickly as possible. Not only that, but the European commission is preparing this week to trigger the closure of another Irish bank in difficulty - Irish Nationwide Building Society. The government had to take a majority share in this smaller bank as well.
 
In fact, none of the Irish banks are immune from the crisis. The overall price of saving the banking system is likely to be around 90 billion euros, half of Ireland's GNP, Gross National Product. That's half of Ireland's wealth.
 
If Ireland was not a member of the EU and of the eurozone, it would have suffered a similar fate as Iceland - the country would be bankrupt.
 
Not risk free
 
Anglo Irish Bank has already cost the Irish taxpayer over 25 billion euros. Its final price tag is estimated to be around 30 to 35 billion euros and the precise figure will be known by next month, according to the Irish finance minister.
 
This uncertainty and the size of the bill are the causes of the markets' concern with Ireland.
 
The plan the government set in motion to wind down the bank should help reduce the fears of a financial meltdown, but the bill for Irish tax payers will nevertheless be enormous.
 
Within a year, they have already had to face pension levies, salary cuts, now probable tax rises, and their public services will be reduced to the bare minimum.
 
As for Europe, saving the Irish banking system is not risk-free. Interviewed by FRANCE 24, Alan Dukes, the chairman of Anglo Irish and former Finance Minister, admitted these were "unchartered waters" for banking and for Europe.
 
Mr Dukes stressed that Europe would have to "show solidarity" for many years with Ireland and Greece. Fortunately for the eurozone, unlike his Greek colleague, Irish Prime Minister Brian Cowen imposed immediate austerity measures and he also had a cash cushion available to oil the machinery of his country’s economy.

 

By Hervé AMORIC

COMMENT(S)

Archives

2016-05-24 Lebanon

Video: Christian NGO brings Syrian refugees to Italy

In Italy, the community of Sant'Egidio, a Christian NGO, is setting up humanitarian corridors to bring Syrian refugee families from Lebanon to Italy. At the beginning of May,...

Read more

2016-05-23 Tunisia

Tunisia steps up security measures to reassure tourists

In Tunisia, the tourist season is just beginning. Since last year's deadly terror attacks on the Bardo museum in Tunis and a hotel in Sousse, which targeted tourists, the sector...

Read more

2016-05-20 China

Beijing tightens control of foreign NGOs

The Chinese government recently passed a law to bring foreign NGOs under stricter control. The legislation, which will come into force in 2017, gives police wide-ranging powers...

Read more

2016-05-19 Philippines

Philippines: Moro Islamic Liberation Front dreams of 'caliphate' on Mindanao

The southern Philippines island of Mindanao is where the majority of the Muslim community lives in this predominantly Christian country. Various armed groups are fighting for the...

Read more

2016-05-18 Egypt

Video: Egyptian journalists feel targeted by regime

In Egypt, protests continue despite the regime's crackdown on dissent. After doctors and lawyers voiced their anger, now it's the turn of Egypt's journalists. The crisis erupted...

Read more