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Run on the banks prompted Irish rescue deal

IMF to pump in $110 billion to Irish economy

By
PATRICK COOPER,
IrishCentral.com Staff Writer
Published Monday, November 22, 2010, 5:00 AM
Updated Monday, November 22, 2010, 8:17 AM

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Bank of Ireland on College Green, Dublin
Bank of Ireland on College Green, Dublin


Fears of a run on the banks caused the weekend bailout of the Irish economy after massive sums were withdrawn in recent weeks.

The New York Times reported that the action taken this weekend of an expected  $110 billion dollar package was “prompted by fears of a bank run when the markets opened on Monday morning.”

It is believed that up to $34 billion dollars has been withdrawn from Irish banks in the past few weeks and that the pace had begun accelerating.

Prime Minister Brian Cowen stated that the decision was taken because “It is essential that we maintain economic continuity, that everyone understands that ATM machines function, that salaries are paid . . . that a large number of overseas investors continue to invest in enterprise.”

He stated there would be two funds set up. One will prop up the ailing banks while the other will allow the government to operate without turning to the bind markets where Ireland was set to be charged a much higher interest rate than they are getting form the IMF bailout.

No exact numbers were given but it was expected that $20 billion would go immediately to the banks and $80 billion to fund government borrowing for the next three years.

“This is a difficult time for the country,” Mr. Cowen said. “We have seen abnormal market conditions so we have had to step out of the markets. We are determined to deal with the issues that have arisen and we will soon have our public finances in order.”

Backbench members of Cowen’s own party, Fianna Fail, have been deeply critical of how the government has handled the issue, widely seen as a pubic relations and political disaster for them.

An opinion poll published this weekend showed Flanna Fail at just 17 per cent support, their lowest ever and their coalition partner The Green Party at just three per cent.

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7 Comments

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americano | Feb 08, 2011, 07:29 AM EST
Fianna Fail is entirely to blame for not initially controlling over-viewing and checking the Irish banking system which due to the bankers stupidity, incompetence, dishonesty, greed, and lies resulted in this terrible financial disaster. They are however not to blame for creating the State banking guarantee since this was essential and certainly needed to protect the Irish financial and banking institutions. Due to the bankers dishonesties the government was not aware of the tremendous amounts of bad loans that came along, and as those silly bad loans amounts became public knowledge the investors and depositors across the globe withdraw their money, and the Irish state and banks depended on the ECB to provide billions of input to keep the Irish State and Banks afloat. According to regulation however, ECB could not continue in this way and as a result the rescue had to come from the EU and IMF. Fianna Fail did reasonably well given the circumstances, but due to Ireland's small economy the banking system could not be re-established without the outside assistance, the opposition parties that will soon be in power will of course try to get a few bonuses both from the EU and the IMF whether they succeed or not depends entirely on the above institutions. Nevertheless, Irish bank savers and depositors should not worry about their deposits since those have been guaranteed officially by the EU in addition to the Irish State, and the Irish State will never allow this to take place because it would entirely destroy Ireland's financial reputation for more than a decade.

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Silling | Jan 06, 2011, 07:21 AM EST
Who is the lady walking by the railings on College Green by the Bank Of Ireland?

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Searlit | Nov 22, 2010, 07:59 PM EST
I agree with you Seamus Mor.

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jacersagain | Nov 22, 2010, 04:45 PM EST
I know exactly why the run on the banks started. I had a not small sum of money on deposit with one of the banks. I received a statement recently showing how much interest the bank allowed me for leaving the sum on deposit – a savings account. The interest was so small it was laughable. I later went into the bank to complain and tell them that I was going to move my savings to another bank. Well, you should have seen the flap that caused amongst the bank staff!! They suddenly offered me other savings products that offered higher interest. The question is why didn’t they offer me this option when I first deposited with them? No wonder people are taking their money out. If even a million other savers like me withdrew their savings now, where will that leave the banks? If they want our business, they need to offer better returns for the loan we savers give them.

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DanOLoingsigh | Nov 22, 2010, 03:30 PM EST
While we’re talking ships.. we’re in uncharted waters - surrounded by sharks, with a leaking hull, a broken compass, a torn sail, a fouled anchor, a drunken Master, with the officers dancing on the fiddley deck laughing at the mutinous crew...

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SeamusMor | Nov 22, 2010, 11:52 AM EST
Olli Baba and forty thieves have stolen Ireland's sovereignty, and now they're going to loan the money to buy it back! Where is Sinbad when you need him? He was the one who picked the pocket of the corrupt official who had just impounded his ship. "You sell me own ship, I pay you with your own coin!" Cancel the Euro debt! Declare a Jubilee! Pull out of the Eurozone and start over with blank balance sheets, and new currency, called something like a "Boru." It is immoral to pay bank's debts off if essential government services are curtailed as a result. Ireland needs to go through a "Chapter 7" bankruptcy and start over fresh, rather than borrowing more German monopoly money. It would be like one big tax on the banks. Give them the bill for the mess they made.

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LoyalCitizen | Nov 22, 2010, 10:16 AM EST
Just as well Bono got his money out of the country before the rush. He might have had to stand in the queue.

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