Open

Coming up

Don't miss

Replay


LATEST SHOWS

DEBATE

If Scotland Says 'Aye': Polls Say Independence Referendum Too Close to Call (part 2)

Read more

MEDIAWATCH

Scottish referendum in the media

Read more

AFRICA NEWS

Homosexuality in Africa: Kenyan movie debuts at Toronto Film Festival

Read more

DEBATE

If Scotland Says 'Aye': Polls Say Indpendence Referendum Too Close to Call

Read more

AFRICA NEWS

Ebola virus: US to send 3,000 troops to West Africa

Read more

THE BUSINESS INTERVIEW

Inger Andersen, Vice President for the Middle East and North Africa, The World Bank

Read more

FOCUS

Scottish referendum: Should I stay or should I go?

Read more

MIDDLE EAST MATTERS

Paris conference: A coalition against the Islamic State group

Read more

ENCORE!

Encore's Film Show: Spies, doppelgangers and gay rights activists

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

2014-09-17 referendum

Scottish referendum: Should I stay or should I go?

This Wednesday is the final day of campaigning before people living in Scotland vote on whether or not to leave the United Kingdom. Our correspondents in Scotland have been to...

Read more

2014-09-16 refugees

Italy: The search for missing migrants

As hundreds more migrants are feared dead in the Mediterranean, we're looking into the disappearance of many of those who do make it to Europe, hoping for a better life....

Read more

2014-09-15 refugees

Lebanon: Islamic State organisation advances on refugee camps

After Iraq and Syria, Lebanon appears to be the next theatre of operations for the radical Islamic State organisation. Arsal, a remote town on the Syrian border, has become the...

Read more

2014-09-12 World War I

The ghosts of German-ruled Namibia

Over a century ago, Germany colonised what is now know as Namibia. In the years that followed, tens of thousands of Africans were killed and all opposition was crushed. After its...

Read more

2014-09-11 humanitarian action

Calais struggles with flood of UK-bound migrants

For years, the northern French city of Calais has been a transit point for some of the world's most desperate people: migrants from countries like Syria, Eritrea, Afghanistan and...

Read more