Thursday 14 December 2017

€80bn bailout: how we’ll pay the price

THE GOVERNMENT will have to meet strict ECB conditions and our banks will be dramatically shrunk as part of the price of last night’s €80bn bailout.

As Taoiseach Brian Cowen effectively relinquished ultimate control of our economic policies, the Government was also forced to remove itself from the international bond markets for three years because of prohibitive borrowing costs.

While the country was officially bailed out by the EU, the final size of the rescue package by the EU and the International Monetary Fund (IMF) has yet to be negotiated. It is likely to be smaller than Greece's €110bn bailout last May but a senior EU source said: “I would say we are talking about €80-€90bn.”

The final sum will include money to recapitalise the banks.

Mr Cowen and Mr Lenihan said they could not give an exact figure until new “detailed stress tests” were carried out on Ireland's crisis hit lenders. Under the terms of the bailout, we will be given €19bn in loans every year for the next three years from the IMF- ECB-EU special fund.

This combined €57bn bailout is solely to fund day-to-day spending – and does not include the tens of billions needed to recapitalise the banks. The banks are facing full-scale nationalisation as further billions are pumped in.

The State is expected to come under intense supervision, with the IMF/ECB likely to demand reports every three months on how our public finances are being managed.

Last night Tourism Minister Mary Hanafin said the fouryear Budget plan would be published on Wednesday. It is all but finalised but will have to be approved by the EU, she told RTE’s ‘The Week in Politics’.

Earlier, the IMF said it wanted “swift'' talks about the aid and the economy.

The Irish Independent has learned that the ECB is already going through the loan books of all the banks, including their mortgages books, to see what losses could yet emerge.

We need to raise €23.5bn next year alone, which the IMF/EU will now provide.

They will also have to cover the €20.7bn needed for 2012 and €18.9bn needed the year after.

After weeks of denials, confusion and controversy, Taoiseach Brian Cowen finally admitted the Government had made a formal request for a multi-billion euro rescue package.

It is the first time in the State's 88-year history that such a bailout has been sought. But despite growing anger among the public – and from within his own party – Mr Cowen refused to shoulder any personal responsibility for the crisis, saying “circumstances” were to blame.

“I don't accept that at all. I would defend my decisions throughout my political career, any decisions I took, the context in which I took them and the rationale for taking them.

“I don't accept your contention, the premise to your question that I am the bogeyman that you're looking for.

“All these decisions were taken in the national interest,” he said.

Mr Cowen also denied the Government was handing over power to the EU and IMF to make budgetary and economic decisions.

“The IMF or people like that don’t micro-manage the Irish economy. We’re not ceding any policy decision in relation to how we’re going to continue with the direction in our own public finances.”

And in another sign of the potential impact of the bailout, Mr Lenihan said that while the Croke Park deal to protect public servants from job and pay cuts had not been raised, it “might be discussed in the future”. Last night savers were assured the bailout had no implications for their deposits.

The Central Bank stressed that there was no question of the IMF (International Monetary Fund) raiding deposit accounts.

Fine Gael finance spokesman Michael Noonan warned the IMF would demand “fundamental restructuring” of how the State ran its public services.

“A lot of people are quite happy the IMF are coming in because they had lost all confidence in this Government,” he said. Fianna Fail TDs have been put under further pressure as their party hit a record low of 17pc in a new Red C opinion poll and face losing up to 40 Dail seats.

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