Open

Coming up

Don't miss

Replay


LATEST SHOWS

AFRICA NEWS

Ebola: Mali's first case dies

Read more

MEDIAWATCH

Queen Elizabeth tweets

Read more

THE WORLD THIS WEEK

The world this week - October 24 2014 (part 2)

Read more

THE WORLD THIS WEEK

The world this week - October 24 2014

Read more

FRANCE IN FOCUS

Art rocks and shocks Paris

Read more

#TECH 24

Samsung's Gear VR Reviewed

Read more

#TECH 24

How to become a Cyborg

Read more

ENCORE!

Paris rediscovers Picasso

Read more

#THE 51%

Should freezing your eggs be a company benefit?

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

2014-10-24 Ukraine

Ukraine's crippled elections

This Sunday, Ukraine is holding parliamentary elections, but some parts of the country won't be voting. The war between government forces and Russian-backed separatists continues...

Read more

2014-10-22 India

Indian uranium mines take heavy toll on locals and environment

India recently signed a nuclear power agreement with Australia and is entering tough negotiations with Japan on new power plants. The aim is to obtain a cheap source of fuel for...

Read more

2014-10-23 Tunisia

Tunisia: Religious education claims bigger role in curriculum

In Tunisia, final preparations are underway for Sunday's parliamentary elections. They are the second since the revolution almost four years ago, and the first since a new...

Read more

2014-10-21 London

London now the world's most expensive city

Soaring property prices and spiralling living costs are nothing new in London. But the British capital has now officially knocked Hong Kong off the top perch for being the most...

Read more

2014-10-20 Turkey

Video: Turkey ‘turns blind eye’ to border-crossing jihadists

It’s a scene Turkish activist Sehbal Senyurt has grown accustomed to witnessing.

Read more