Ireland’s new leader Enda Kenny woke up to a harsh reality on Sunday morning – the country’s banking industry is even worse off than anyone imagined.
Kenny’s Fine Gael-Labor government could have to fork out anything up to another $35 billion before the bail-out of the banking sector is complete.
The astonishing figure has come to light in the results of stress testing of the Irish banks, ordered by the government in the run-up to the general election.
Former Minister of Finance Alan Dukes, now chairman of the doomed Anglo Irish Bank, had warned that the banking crisis could cost the Irish taxpayer a whopping $55 billion before it is resolved.
Now his overall estimate could be conservative according to a report in the Sunday Independent.
Senior government sources have confirmed to the paper that the stress-testing process will show that the state of the balance sheets at the banks is ‘considerably worse’ than previously thought.
Former Finance Minister Brian Lenihan injected $13billion worth of capitalization into the banks but losses now revealed suggest the total figure required will be much worse.
The stress-test report will be presented to new Minister for Finance Michael Noonan this week.
Prime Minister Kenny will digest the figures – and the need for substantially more money from the IMF/EU bail-out fund – before he looks to renegotiate the terms of that rescue deal at an EU summit later this month.
“The additional amount is certainly higher than $13 billion but is lower than the huge figures being spoken about in Europe. But inevitably it does mean further pain for the taxpayer,” a senior government source told the Sunday Independent.
“The hope was that this stress-testing process would not show any further losses. Unfortunately, that is not the case, there is worse still to come.”