EU role in the Anglo saga open to question
Published 09/09/2010 | 05:00
ANGLO Irish Bank remains the great unsolved problem of Irish banking and everyone wants to blame the Government for all the delays, U-turns and financial navel-gazing. But the role of the European Commission in the whole saga has been less than helpful and anything but dynamic.
With its guiding principle that bondholders and depositors must be protected at all costs, the commission has rubber-stamped a series of capital injections into the bank, allowing colossal forms of state aid in order to prevent a "serious disruption in the Irish financial system''.
Just like the Irish Government, the commission has been playing catch-up on Anglo's problems right from the start.
For example, it falsely believed in January 2009 that Anglo only required €1.5bn of fresh capital and it approved such an injection on January 14, 2009. The commission then performed an even more bizarre contortion when the bank was actually nationalised on January 15.
Even though the Government was taking over the entire institution and effectively preventing its collapse, the Commission concluded that this "did not involve state aid to the bank'', prompting it once again to rubber-stamp a highly controversial decision.
But the chief way in which the commission has been unhelpful throughout this period is the sheer amount of time that it has taken to give a definitive view on what to do with Anglo.
It has been continually asking questions and seeking clarifications on the Anglo good bank-bad bank split (and other alternatives) since November 2009, a quite extraordinary nine months of reflection.
When dealing with a bank with such a toxic balance sheet as Anglo, where impairments literally crop up on a daily basis, a quick decision on its future was absolutely vital, despite all the complexities.
Unfortunately, the commission failed to deal with this matter expeditiously, thereby leaving the Irish economy to deal with an open wound for far longer than was necessary.