Tuesday 23 January 2018

Bailout cost for Anglo to be revealed within days

Lenihan keen to finalise figure as uncertainty weighs on markets

DANIEL McCONNELL chief Reporter

The final cost to the taxpayer of bailing out failed Anglo Irish Bank will be known by the end of this month, the Sunday Independent has learned.

Ireland's financial position has been weakened considerably in recent weeks because of the continuing uncertainty over the total cost of the bailout, and Finance Minister Brian Lenihan is keen to bring finality to the issue as soon as possible.

It has emerged that a final figure for the bailout will be announced within the next 10 days or so, once final agreement and clearance has been obtained from Brussels.

The bank will cost at least €25bn, but the bill could go higher, Anglo Irish chairman Alan Dukes has admitted.

International ratings agency Standard & Poor's last month cut Ireland's sovereign credit rating to AA-, its lowest since 1995, due to its estimated €35bn cost of the bank rescues and the size of the budget deficit.

According to Mr Lenihan, even if a sum like €25bn is financially manageable if stretched out over a long time, the markets want the certainty of knowing what the final cost will be.

It has also emerged that customer funding at the failed bank amounted to €23.1bn as of June 30, 2010, while market funding amounted to €49.8bn it has emerged.

Of that €49.8bn, some €26.3bn is funding support from the European Central Bank (ECB) and other central banks.

Financial Regulator Matthew Elderfield has been tasked with identifying the final figure to bring that much-needed certainty after Irish bond spreads peaked at record highs last Friday.

Bond spreads are the cost of borrowing to Ireland over what Germany pays.

Last Friday, the interest rate being demanded to lend to Ireland was 6.34 per cent. This is from a level below 5 per cent earlier this year.

ANALYSIS Pages 24, 25, 38

This followed the release of two separate statements from the Department of Finance and the International Monetary Fund (IMF), denying an earlier report that Ireland was close to needing outside emergency assistance.

Speaking to the Sunday Independent on Friday about the matter, Mr Lenihan said: "The IMF released a statement saying there is no question of Ireland needing emergency support.

"Unfortunately this was a very damaging report, because of the headlines.

"It has caused some minor speculation on world markets but that speculation has eased."

He added: "But it was an inaccurate report. Ireland is not in that position and the Barclays report didn't suggest Ireland was in that position.

"Barclays are very good buyers of Irish debt and the position is that Barclays commended the Government, saying it had taken all the right steps so far. But, of course, it did point out that the Government would have to continue to take the right steps."

Several leading European analysts have commented since Friday that Ireland is "struggling to raise the funds" it needs from the markets as investors shun the country on fears over the sustainability of its finances.

The ECB has been buying small amounts of Irish bonds, traders said, with the latest instalment yesterday.

Domenico Crapanzano, head of euro rates trading at Jefferies, a major global securities and investment banking group, said: "There are just no buyers out there for Ireland because of worries over its economy."

Ireland has been widely praised for the austerity measures it is undertaking to cut the deficit and get on top of its public debt.

However, economists are now questioning whether -- given the austerity measures and the size of the banking crisis -- Ireland will be able to pay its debts.

Sunday Independent

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