Fears of a run on the banks caused the weekend bailout of the Irish economy after massive sums were withdrawn in recent weeks.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It is believed that up to $34 billion dollars has been withdrawn from Irish banks in the past few weeks and that the pace had begun accelerating.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.