Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

Dance like nobody's watching!

Read more

DEBATE

Burundi's Brutal Standoff: One month on tension spirals (part 2)

Read more

DEBATE

Burundi's Brutal Standoff: One month on tension spirals (part 1)

Read more

THE INTERVIEW

Masoud Barzani: 'We are prepared to recover Mosul very quickly'

Read more

FOCUS

Lebanon marks one year without a president

Read more

REPORTERS

A year after coup, Thai opposition resists junta rule

Read more

REPORTERS

Are there lessons to be learned from Chirac’s foreign policy?

Read more

THE INTERVIEW

Novak Djokovic: 'I have grown'

Read more

EYE ON AFRICA

At least three dead in grenade attack in Bujumbura

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

2015-05-25 Lebanon

Lebanon marks one year without a president

In Lebanon, the president's chair has now sat empty for a full year. Electoral rules state that the head of state must come from the Maronite Christian sect, but this isn't...

Read more

2015-05-22 Ireland

Ireland votes in world's first referendum on same-sex marriage

A world first in Ireland as it asks the population to vote in referendum to allow same-sex marriage. All Ireland's political parties are lined up behind a "Yes" vote while most...

Read more

2015-05-21 France

Mother of French terror victim seeks to open minds

Latifa Ibn Ziaten is the mother of one of the seven people killed by Mohamed Merah, the "Toulouse gunman", in 2011. After the tragedy, this grieving mother created an NGO named...

Read more

2015-05-20 Martinique

French overseas territories: Army helps young people get on career ladder

The Adapted Military Service Regiment was created 50 years ago in Martinique, well before the end of conscription in France. It currently only exists in France's overseas...

Read more

2015-05-19 demonstrations

Tunisia: Protesters urge government to do more for economy

In Tunisia, the new government is still trying to sort out an economy in crisis. Worst affected are the inland regions, neglected under the former dictatorships, and at the...

Read more