Thursday 24 October 2019

Revealed: Bailout bill stands at €8,639 for each of us

Analysis shows €41.9bn price tag to stave off collapse 10 years ago

The figure works out at €8,639 a head for Ireland’s population of 4.8 million people
The figure works out at €8,639 a head for Ireland’s population of 4.8 million people
Donal O'Donovan

Donal O'Donovan

The price of bailing out the banks a decade ago now stands at €41.9bn, according to new figures prepared for the Irish Independent.

The figure works out at €8,639 a head for Ireland's population of 4.8 million people.

With the burden of taxation falling most heavily on about two million workers, the cost to each of them is about twice that.

However, the final figure is likely to be significantly better, says Philip O'Sullivan, the chief economist at specialist bank Investec Ireland, who made the calculation.

Mr O'Sullivan believes it will fall to significantly lower than €30bn as more money is recovered from the bailed out banks.

But the numbers can change suddenly. A sharp drop in AIB's shares last week brought the fall in the value of taxpayers' 71pc stake in the bank to €2bn since the start of the year.

Investec's bailout tally includes the value of direct bank recapitalisations as well as the cost to taxpayers of the funds that were used to finance the bailout.

By including the interest that the State had to pay for funds used to recapitalise the bank, Investec put the real price paid to save the banking sector at €80.6bn - €66.8bn of direct recapitalisations plus a financing cost of €14.8bn.

Subtracting money clawed bank from the banks over the past decade - including selling shares, bank levies and money recouped through the Central Bank - the bill falls to €41.9bn.

That does not take account of the potential recovery - estimated at €14bn - of the value of the State's remaining stakes in banks and the likely dividend from Nama (the National Asset Management Agency) when it is wound up in two years' time.

Mr O'Sullivan said: "In practice, the net cost will be lower as we see the value of the investments in the continuing institutions (banks) growing over the coming years, while Nama is expected to perform better than guided."

The Government could in theory recoup around €10bn immediately by selling off the remaining stakes it holds in AIB, Bank of Ireland and Permanent TSB.

Adding the forecast Nama surplus of €3.5bn that would cap the final bank bailout bill at €28bn.

Holding on to bank shares holds out the chance of cutting the bill further.

But in the event of a sharp fall in bank shares - as a result of Brexit or a renewed euro crisis - the shares held by the State could just as easily take a sudden plunge. The State's 71pc stake in AIB highlights how big those swings can be.

Based on Friday's closing share price in Dublin, that stake is valued at €8.5bn.

That is significantly lower than when the rest of the shares in the bank were floated on the stock market in July last year.

Since the start of this year the value of the State's stake in AIB has fallen by €2bn.

Irish Independent

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