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Monday 29 May 2017

Final bill for toxic Anglo could now reach €34bn

Maeve Dineen, Emmet Oliver and Fionnan Sheahan

THE cost of bailing out Anglo Irish Bank could hit €34bn, the Government admitted early today.

Hours after it scraped by on a Dail vote and got a modest boost in the latest opinion poll, the Government revealed that it now estimates the final bill for Anglo will range between €29bn and €34bn.

This is the "worst-case scenario", to be outlined by Central Bank governor Patrick Honohan and the Financial Regulator Matthew Elderfield this morning.

To date, the Government has committed €25bn to the bank. It will now have to inject another €4bn to €9bn.

The new estimates will mean the Government has less money to spend and will have to introduce an even tougher Budget in December.

And it will mean that every man, woman and child in the country could end up paying as much as €8,095 each to bail out the bank. Today's final bailout figure is almost eight times the original estimate.

When Finance Minister Brian Lenihan first proposed nationalising Anglo Irish Bank in January 2009, he estimated that it would cost €4.5bn.

The revelations followed a dramatic day. The return of the Dail after a 12-week summer break was marred by a cement truck being driven into the gates of Leinster House. Self-styled 'Anglo Avenger' Joe McNamara (41) was last night charged and is due to appear before the criminal courts of justice this morning in relation to the incident.

Taoiseach Brian Cowen meanwhile received a boost when an opinion poll showed Fianna Fail rising with marginal improvements in the satisfaction ratings for him and his Government. The Labour Party continued to surge ahead of its opponents in the poll.

Fine Gael leader Enda Kenny was hit by another huge setback as support for his party dropped in the Ipsos MRBI poll for the 'Irish Times'.

It now has dipped to the same level of support as Fianna Fail.

Finance Minister Brian Lenihan last night warned the State's financial stability would be "seriously jeopardised" if the Government did not renew the bank guarantee.

And the Government indicated it will continue to limp on with a narrow majority.

The coalition finally confirmed it would hold the three Dail by-elections next spring amidst claims that its "days were numbered".

Forced

The Government had originally planned to make the announcement of the final bill for Anglo after markets closed today, but this has been abandoned in favour of an announcement this morning, followed by a press conference in government buildings.

It was forced to come up with a definitive cost for Anglo Irish after the bondholders who lend money to the country became fearful that the eventual bill would bankrupt the country.

The €34bn figure is close to the €35bn estimate made by ratings agency Standard & Poor's earlier this month. This figure was rejected by both the Government and the Central Bank at the time.

The Government is now expected to cut a deal with holders of subordinated Anglo debt to keep a lid on the cost of propping up the bank, even though the savings involved are relatively small.

Subordinated debt pays the highest interest rate to lenders but is riskier than other kinds of debt.

Anglo will make a voluntary exchange offer to these bondholders, offering them a small premium to the market price of these bonds.

The difference between this price and the face value of the bonds will give Anglo a gain, meaning the total amount of money needed by the bank is reduced.

Irish Independent

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