Interest bill for bank bailout to be €1.5bn every year until 2025
Published 22/10/2010 | 05:00
TAXPAYERS will have to pay up to €1.5bn in interest charges every year for the next 15 years to foot the bill for the banking bailout.
The Dail's Public Accounts committee yesterday heard that the massive interest charges were directly contributing to the €18.5bn deficit in the public finances.
And it will ensure that more cutbacks and taxation increases are on the way in the Budget to cover the cost.
Department of Finance secretary-general Kevin Cardiff said there would be a €1.5bn annual interest charge to cover the cost of borrowing around €30bn required to pay for bailouts of Anglo Irish Bank, Irish Nationwide and EBS.
He said it would take around 14 to 15 years for the cost of servicing this borrowing to be paid off.
"Until the principal is paid down, until Ireland gets into surplus, that interest will have to be paid," he said.
The committee is investigating the events surrounding the €440bn state banking guarantee in September 2008 and is due to publish results next year.
Mr Cardiff rejected suggestions from committee members that the total bill for the banking bailout could reach €60-€70bn when interest payments were included.
He said this was not taking into account potential gains from the State's stake in AIB and Bank of Ireland and the payments made by the banks in return for the state banking guarantee.
There was strong criticism at the committee of the "grossly misleading" picture painted by Anglo Irish Bank of its finances before the state banking guarantee, and of former chief executive David Drumm, currently living in the US.
Committee chairman Fine Gael TD Bernard Allen said he was a "fugitive from accountability".
"It appears Mr Drumm is still running rings around the State. For all our constituents who will be grappling with budget cutbacks, it has all the hallmarks of one law for the rich and one for the poor," he said.
Mr Cardiff said some of the suggestions from Anglo Irish Bank before it ran out of money in 2008 seriously lacked credibility -- such as its proposal to take over Irish Nationwide.
Mr Cardiff admitted his department could have done more to improve the "clearly inadequate" supervision being carried out by the Financial Regulator.
"In retrospect, had the department leaned on the regulator more and said 'Are you doing enough?', it would have been good, too," he said.