'This is the best way forward, but there are no good ways forward'
CENTRAL Bank Governor Patrick Honohan last night insisted the State was left with no choice, even though pumping up to €60bn of taxpayer cash into the banks "doesn't score highly on fairness".
The comments came minutes after the Central Bank announced that the State could end up putting as much as €24bn in AIB, Bank of Ireland, EBS and Irish Life & Permanent -- on top of the €46bn banking bailout that's already been promised.
"This is the best way forward, but there are no good ways forward," Prof Honohan said.
"It doesn't score highly on fairness. Another way forward might score a few more fairness points but it would be biting off nose to spite face."
The Central Bank boss also insisted that at least €3bn of yesterday's €24bn would come back to the State over the short-term and that the Government may get other returns in the long run.
"I don't want to end up saying it's a fantastic investment for the Government," he stressed.
"But the deal is structured so that the bailout is excessive to what's required ... The Government should get that excess back when the banks are sold."
Some €14.8bn of the latest bailout will be split between AIB (€13.3bn) and EBS (€1.5bn), which are both already nationalised. Bank of Ireland, which counts the Government as a 36pc shareholder, has to raise €5.2bn while privately-owned Irish Life & Permanent must come up with €4bn.
The banks have not yet been given a firm deadline for raising capital, but Prof Honohan said they would have to come up with the cash "soon".
"I don't want to prevent anybody from raising capital in the market," Prof Honohan said. "At this scale of capital [it is likely] that we will see majority state ownership of all institutions. I suppose that's only realistic."
The Central Bank boss admitted that while Ireland was "doing a huge strengthening" of the banking sector, "it's not as if the banks will float off completely free".
"The banks' and the Government's finances are still very much intertwined in the market's mind," he stressed. "Fixing the public finances is also a huge prerequisite [for sorting out the banks].
"The action on the banks is done in an anticipatory way, to put in all the capital now ... for the public finances, the only fix that's available is the slow haul of cuts and taxation measures."
Prof Honohan also insisted that while it had taken Ireland several attempts to detail a definitive plan for the banks he didn't think the country has "lost anything by this process".
"I've probably lost a bit of reputation ... but I don't think it [the lengthy process] has damaged the evolution of the economy or the banking situation."
Recent commentary had suggested that the scale of the banking bailout could be too big for Ireland to bear. Prof Honohan said Ireland could pay for the banking crisis as part of the €85bn EU/IMF bailout.