Don't miss

Replay


LATEST SHOWS

FOCUS

Rio mired in economic crisis a year after hosting the Olympics

Read more

ENCORE!

Elizabeth Strout: 'There’s something emotionally truthful about my characters'

Read more

THE INTERVIEW

Polish foreign minister: Macron's comments on Poland 'were not necessary'

Read more

THE OBSERVERS

The controversial colonial statue in Senegal; and the centuries-old town in Turkey being destroyed by the govt

Read more

BUSINESS DAILY

End of an era: Toys 'R' Us files for bankruptcy

Read more

IN THE PAPERS

'We aren't ready' for a second vote in Kenya and flip-flopping on climate change

Read more

IN THE PAPERS

Another Hurricane? It's Maria's turn. And, when's your printer going to stop working?

Read more

EYE ON AFRICA

DR Congo: New report says army worked with militias to massacre hundreds in Beni

Read more

MEDIAWATCH

All eyes on Trump and Macron at UN General Assembly

Read more

FOCUS

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

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

2017-09-19 Americas

Rio mired in economic crisis a year after hosting the Olympics

A state of "financial calamity" was declared in Rio de Janeiro just before it hosted the August 2016 Olympic Games. Salaries for public servants went unpaid and funding was...

Read more

2017-09-18 Asia-pacific

Rohingyas crowd into makeshift camps in Bangladesh after fleeing Burma

On the border between Burma and Bangladesh, the exodus of Rohingya people continues. In less than a month, more than 400,000 of them have crossed the border into neighbouring...

Read more

2017-09-15 Africa

Violent youth gangs spread terror in Abidjan

In Ivory Coast, violent youth gangs are spreading terror across the economic capital Abidjan. For several weeks now, these groups of delinquents - some as young as ten - have...

Read more

2017-09-14 Middle East

War in Yemen: Are Western weapons being used against civilians?

Since March 2015, Saudi Arabia has been leading a coalition of Arab states waging war in Yemen to overthrow the Houthi rebels, a pro-Iran Shiite militia which controls the...

Read more

2017-09-13 Europe

How migrants struggle to cross the Italy-France border

France has pledged to take in 30,000 migrants, currently in Greece or Italy, by the end of 2017. But so far, fewer than 2,000 are believed to have been relocated to France. At...

Read more