Bank shares jump in wake of bail-out
Shares in Irish banks jumped today in the wake of the €85bn bail-out of the country's crippled economy from the International Monetary Fund (IMF) and Europe.
Bank of Ireland was up almost a fifth to 32 cents while Irish Life & Permanent soared more than a half to 80 cents.
Allied Irish Banks saw a hike of 6pc to around 36 cents.
The rescue deal, which includes €35bn for the banks, was approved at an emergency meeting of European Union finance ministers in Brussels yesterday - a day after 50,000 protesters marched through the streets of Dublin against the Government's drastic austerity measures.
Taoiseach Brian Cowen warned that without the loan, pending tax hikes and spending cuts would be more severe.
He said it was essential for the country and in the best interest of its people and the eurozone.
"It allows us to move forward with secure funding for our essential public services, for our welfare state, for the most vulnerable members of society that depend on them," he added.
The overall loan facility includes up to €35bn to support the banking system - €10bn of which will be drawn down immediately for the recapitalisation at a rate of 5.8pc. Some €50bn will cover financing the state.
Of the €85bn, Ireland itself will contribute €17.5bn by raiding pension funds to prop up the ailing banks.
Bank of Ireland is being given the chance to raise €2.1bn in capital itself by February to avoid the Government stepping in.
Irish Life & Permanent said it would have to raise an extra €100m but would use its own resources.
Noel Dempsey, Transport Minister, said his view on the negotiations was that Ireland would not have been able to secure the bailout if they tried to "burn the bondholders".
"There would be no deal if we went down the route some people were suggesting," Mr Dempsey said.
Opposition politicians claimed the bail-out agreement amounted to a national sell-out that would leave the country crippled with debt.
Pat Rabbitte, Labour Party justice spokesman, called on the Government to clarify the legal status of the bailout deal, suggesting it should be approved by the country's parliament.
He claimed uncertainty about the status of the agreement could provoke court challenges and cause further instability.
"On the one hand it seems clear that, rightly or wrongly, the Government does not regard a programme which has been agreed with the other EU member states as well as the IMF as an international treaty", Mr Rabbitte said.
"If it was a treaty then, under Article 29.5.2 of the Constitution, its terms would have to be approved by the Dail. Yet the Taoiseach and the Minister for Finance have made it clear that they will not submit this programme to a Dail vote."
Mr Rabbitte said that if it was not an international agreement it was nothing more than a contract or statement of future policy, which he claimed had the same status in law as an election manifesto.
Social justice campaigner Fr Sean Healy said the terms of the bailout showed the IMF and Europe supported the Government in targeting the poor, sick and vulnerable.
"It is not acceptable that the IMF claim it is protecting poor people when this is patently not the case," Fr Healy, Social Justice Ireland director, said.
"It is totally unacceptable that the European Commission, the IMF and the Irish Government develop and implement a programme which will see Ireland's weakest groups take the major part of the 'hit' for the reckless actions of greedy bankers, incompetent regulators and an inept government."
The Irish Government applied for the loan last Sunday when it conceded the bank crisis was too big for the country.
Mr Cowen said the banking sector would be downsized and restructured under the terms of the package.
However the bailout does not provide for bondholders to take a hit, but the system will be replaced in 2013 when a new mechanism will mean bondholders face funding a share of any more bailouts.
Dominique Strauss-Kahn, IMF managing director, said Irish authorities had proposed a clear and realistic package of policies to restore Ireland's banking system to health and put its public finances on a sound footing.
"Supported by substantial financing, this program can underpin market confidence and bring Ireland's economy back on track," he added.