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Ireland faces the possibility of default as Anglo Irish bill estimated at $47.4 bn

Rating agencies cast doubts on Irish economy

By
BARRY J WHYTE,
IrishCentral.com Staff Writer
Published Wednesday, September 29, 2010, 7:45 AM
Updated Wednesday, September 29, 2010, 8:00 AM

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Default looms over the Irish economy as credit rating agency Standard & Poor’s said the cost of the Anglo Irish Bank recapitalization could cost more than EUR35 billion, which could lead to further downgrading of the Irish economy’s rating.

Anglo Irish Bank is to be split into two entities, according to the government, an ‘asset recovery bank’, which means a bank which will try to squeeze whatever value is left in the grossly devalued property deals to which Anglo loaned money, and a funding bank, which will hold deposits. Trevor Cullinan, an analyst at Standard & Poor’s, told Irish radio that this is likely to cost at least EUR35 billion. To date, the Irish taxpayer has pumped nearly EUR23 billion into Anglo Irish.

This places the Irish government in a tricky position. According to Bloomberg News, the Irish government may soon have to decide whether it can fully repay its bondholders (that is, the institutions from which it has borrowed), or tackle the towering budget deficit, caused in large part by the bailout of Anglo Irish and the other troubled Irish banks.

Greg Venizelos of BNP Paribas told Bloomberg that, “It’s a key test for the market. The cost of the
Anglo Irish bailout is too high for Ireland to afford without jeopardizing its fiscal position.”

According to Down Jones newswires, Gary Jenkins, the head of fixed income research at Evolution Securities, said "It was only last week that Irish Finance Minister Brian Lenihan was quoted as saying that 'It's unthinkable that Ireland would default on senior debt or that Ireland's banks would default on senior debt,' and that 'Ireland is not prepared to be some kind of social experiment for bank default'.”

"So either the unthinkable has become thinkable or the rating agency has got this one wrong," he said.

Three weeks ago, Bloomberg News had pointed out that the Irish government’s bank bailout pledged had already put its debt at a position higher than that of Iceland, which a 22.4 percent probability that the country would default within five years.

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7 Comments

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GeorgeDillon | Oct 02, 2010, 03:07 PM EDT
marsman: Thank you for your reply. Are you saying tht the Irish liability is only a product of the Irish govt signing obligations when Anglo was on the point of collapse? If so, the govt were fools to sign anything. More than fools, they were traitors to the people who elected them.

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jimmy12003 | Sep 30, 2010, 03:16 PM EDT
this country will soon be burst! as a result of the bankers and politicans fuc-king with the taxpayers money! once again, bring back the death penilty!if they would do that, i would happily put my name down to be the man kicking out the chair from under them!

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Applejuice | Sep 30, 2010, 07:56 AM EDT
Does the Real IRA'S recent threat to London bankers also include their Irish counterparts as well as the Irish central bank?

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marsman | Sep 30, 2010, 07:11 AM EDT
@ GeorgeDillon: the liability for the taxpayer / citizen began the moment the government signed - in the name of the state, that means everybody - the various guarantees and obligations That's the power of a government, legally and financially binding it's citizens. It is authorized to do so, with all consequences. (Since ancient times that is also known as a particular Judas phenomenon, acts of betrayal.) Hopefully not coming across as patronizing, suggested reading would be: "Eight hundred years of financial crisis", by K. Rogoff et al.; Niall Ferguson: The ascent of money (very lucid reading) and: Adam A Tooze: Wages of slavery (The financial history of the Hitler's Reich; it carries the reader through the whole lot of decait, fraud, coercive measures, et al., to the end. Benefits of reading this book is a sixth sense for anything dodge, fraudulent, even though not related to the theme.) Some googling might be useful and interesting at first, if interested.

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Dublinjas | Sep 29, 2010, 11:10 PM EDT
Ireland will Default ...And the sooner the better.....It is time the world knew just what kind of crooks the Irish bankers are......Just like bankers everywhere really..

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justhimself | Sep 29, 2010, 09:10 PM EDT
The bankers and politicans were in bed together, a little bribe, and the Irish politican sold his soul, Just like our Irish American senator Dodd, chairman of the senate banking comittee oversght was, look the other way. THE WORKING CLASS WILL ALWAYS CARRY THE BIGGEST BURDEN.....be careful who you vote for, but always vote...

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GeorgeDillon | Sep 29, 2010, 02:11 PM EDT
Maybe someone in Ireland will explain to me why Irish people can be held liable for the debts run up by private banks. It's as if I lost money at the track and demanded that everyone who posts on this site chip in to pay my losses. If I don't pay my bookie that means I default, not everyone else on IrishCentral.

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