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Roll up, roll up, for the greatest asset-stripping event this century

In February Public Expenditure and Reform Minister Brendan Howlin announced plans to sell state assets worth up to €3bn. These proposed sales had been approved in advance by the EU/ECB/IMF troika.

Although the February announcement was accompanied by great fanfare, the reality was that it was pretty much the absolute minimum which the government could have got away with without antagonising our international paymasters.

Among the job lots being offered for sale was the Bord Gais retail energy business, the harvesting rights to some of the Coillte forests, some "non-core" ESB generating assets and the State's remaining 25pc Aer Lingus stake.

Excluded from the sale were not just most of the ESB but also the gas and electricity interconnectors with the UK, the electricity grid, the gas pipeline system, the airports, the ports and Coillte's 1.1 million-acre estate.

Paymasters

Mr Howlin's initial list of state assets destined to be sold was compiled with at least one eye on the Labour Party's trade union paymasters. The exclusion of most of the ESB from the sale was particularly telling.

With the recent assessment from the Fiscal Advisory Council (FAC) warning that the government would have difficulty meeting its budgetary targets for this year and for the three following years out to 2015, further state asset sales beyond those already announced are virtually inevitable.

The FAC estimates that the government will have to raise a further €2.8bn in public spending cuts and tax increases on top of the €12.4bn already planned by the end of 2015.

The electricity grid, the gas pipelines, the gas and electricity interconnectors, airports, ports, the Coillte estate and the ESB will almost certainly end up being sold sooner rather than later as the government desperately seeks to raise cash.

One of the little-recognised consequences of the Irish economic meltdown has been the huge expansion in the state sector.

To the traditional state sector of central and local government, as well as the semi-states, must now be added virtually the entire indigenous financial sector and most of the property market.

Anglo and the Irish Nationwide, which have been merged into the Irish Bank Resolution Corporation (IBRC), have been nationalised outright while AIB, which has swallowed EBS, and Irish Life & Permanent are now more than 99pc state-owned.

Bank of Ireland is the only domestically owned bank to have managed to avoid majority state ownership.

However, even Bank of Ireland is 15pc state-owned, has two state-appointed "public interest" directors on its board and would find the going even tougher than it already is without a state guarantee for most of its deposits.

For left-wing politicians of a certain vintage nationalising the banks was a stock policy that could be trotted out at each successive general election, apparently secure in the knowledge that they would never have to deliver on their promise.

However, now that this day has come to pass, our politicians would dearly love to sell the banks, and their huge liabilities which have already cost the Irish taxpayer €64bn, back to the private sector.

Last year, in a deal which kept Bank of Ireland out of the state sector, a North American consortium fronted by veteran investor Wilbur Ross paid €1.1bn for a 35pc stake in Ireland's oldest bank.

Unfortunately for the State this money went to purchase new Bank of Ireland shares rather than to the exchequer.

The other Irish-owned banks are in a far more parlous condition than Bank of Ireland. IBRC is being wound down while both AIB, which has written off €25bn over the past three years, and IL&P's mortgage bank subsidiary Permanent TSB are on life support.

Much and all as the Government would love to find buyers for AIB and Permanent TSB, it might have a long wait.

Far more probable in the short term is a sale of IL&P's still-profitable Irish Life subsidiary, the largest life and pensions provider in the country, which was recently purchased by the State from IL&P for €1.3bn as part of a convoluted transaction which saw €4bn of fresh capital injected into IL&P.

The State was forced to purchase Irish Life, which it had previously privatised in 1991, after plans to either float it on the Stock Exchange or sell it to a trade buyer fell through.

In other words, far from recovering any of the money which it has had to pump into the banks in order to keep them afloat, the State is still having to hand over even more money.

The best hope for a sale in the medium term of either AIB or IL&P, now effectively Permanent TSB, lies in the government doing a deal on tracker mortgages with the EU and the ECB as part of a wider restructuring of Irish bank debt.

Unless and until such a deal is done, these two banks, which between them have €34bn of loss-making Irish tracker mortgages on their books, are practically unsellable.

Unfortunately, as if finding buyers for most of the semi-states and large swathes of the financial system wasn't enough to be getting on with, there is also NAMA. In fact the NAMA numbers dwarf those of either the semi-states or the banks.

NAMA paid Anglo, AIB, Bank of Ireland, Irish Nationwide and EBS (but not Permanent TSB) a total of €31bn for bad property loans with an original value of €74bn.

While no-one expects NAMA to recover the loans' original value, it is now becoming increasingly clear that it will struggle to recoup even what it paid for them.

In the more than two years since it first came into existence NAMA has concentrated on selling off overseas assets such as the £660m loan to the Maybourne Hotel Group, which is currently the subject of a legal battle in the London High Court between developer Paddy McKillen and the Barclay brothers.

By the end of September 2011, NAMA had sold off over €5bn of mostly overseas assets. Which of course leaves it with mainly Irish assets with a written-down value of about €26bn.

While buyers may be found for some of the better-quality assets in the larger cities the queue of would-be purchasers for shopping centres, industrial units, apartment blocks, warehouses and retail parks in Ballygobackwards is likely to be a very short one.

Even if buyers can be found for these assets the price received by NAMA will almost certainly be considerably less than even their written-down value. However, even a NAMA firesale would still yield gross proceeds of tens of billions of euro, a multiple of what is likely to be received from the sale of other state assets.

Regardless of how much the government succeeds in raising from the sale of state assets, the Ireland which emerges from this process will be a very different place from the one most of us grew up in. With the Irish State, banks and much of what remains of the private sector essentially bust, most if not all of these asset sales will be to foreign buyers.

Ownership

We are about to witness what will probably be the largest change in property and asset ownership seen in this country since the Land Acts of the late 19th and early 20th centuries transferred ownership of the landlords' estates to their tenant farmers.

The Irish banks will become subsidiaries of British or mainland European banks. Irish Life will also go to a foreign buyer when market conditions improve.

The situation in the UK, where most of the gas and electricity utilities are foreign-owned, mainly by French and German companies, will be replicated in Ireland. The same will probably happen to the proposed new national water company whenever it is established.

Will the Chinese swoop for our ports, airports and forests? A Chinese company has already leased Pireaus, the largest Greek port, for 35 years and the Chinese have also been busy snapping up natural resources throughout Africa.

Other state assets, particularly the NAMA property portfolio, are likely to be divvied up among the usual suspects of hedge funds, bottom-fishers and "vulture" capitalists.

The new post-bust Ireland will be very much a "branch economy" with most of us working for foreign bosses and the important decisions being taken elsewhere.

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