Thursday 23 February 2017

Crippling cost of bailout to top €25bn

DANIEL McCONNELL Chief Reporter

THE shocking cost of the taxpayer bailout of the banks is set to top €25bn, it has emerged, which will double the country's deficit this year.

As a result of lower-than-expected valuations in the first transfer of borrowings to Nama later this month, the burden on the Irish taxpayer is set to increase significantly.

If that amount is to be injected into the banks, it means that the government will effectively nationalise the banks in all but name.

Finance Minister Brian Lenihan and his fellow cabinet ministers have been softening the ground for the pending capitalisation, but the level of money needed will be far higher than anticipated.

The cost of the controversial bank rescue plan has been estimated by Standard & Poor's, the credit rating agency, at €20bn-€25bn which, if incurred in one year, would double the budget deficit. If the cost of the potential bank bailout is included, it would push up the national debt to close to 100 per cent of gross domestic product.

Additional figures obtained within the Department of Finance by the Sunday Independent suggest that while the €25bn is at the upper end of the scale, it is in the region of figures currently being discussed.

The opposition said yesterday that if the taxpayer is hit to such a degree, then the grand Nama plan will have been a total failure.

Fine Gael's finance spokesman Richard Bruton said yesterday: "Nama was designed to do two things. One, to get credit going, and second to avoid nationalisation.

"If the taxpayer is hit for €20bn, then we will have nationalisation by the back door and we still have the problem of credit not flowing."

It was confirmed last week that the first tranche of toxic loans from two key lenders being transferred into the State's 'bad bank' are set to be worth up to 40 per cent less than their original value.

As a result, taxpayers will be hit with an even bigger bailout than originally estimated if the rest of the loans into Nama are discounted to the same extent.

Sources revealed impaired loans from Irish Nationwide and Anglo Irish Bank were coming out worst from the exercise. Irish Nationwide, in particular, has found it difficult tying down security details for loans to some of the country's most embattled developers.

The first transfer of the 10 biggest borrowings is set to happen later this month, which will be followed by the capitalisation process in April.

Mr Lenihan said he accepted that "serious challenges" remained for the banking sector.

Sunday Independent

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