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Taxpayers' bill keeps on growing

The government has been playing catch-up ever since Anglo's problems became public knowledge two years ago. First we were assured that it would cost "only" €4bn to fix Anglo. Then the figure jumped to €12bn and then to €22bn and €25bn.

Now the meter has hit €34bn. Where will it all end?

The bad news for taxpayers is that even the Government's latest estimate of €34bn is likely to be comfortably surpassed by the time all of the bills have been paid. Ratings agency Standard & Poor's has already publicly stated that it expects the total cost of bailing out Anglo to be as much as €40bn while some other analysts have predicted that it could go even higher.

Regardless of the final cost it is now clear that Anglo will be by far the costliest bank failure in Irish financial history. Even if the Government succeeds in capping the cost at "only" €34bn that's still €3bn more than this year's projected tax take of €31bn.

The bad news for taxpayers is that the quality of Anglo's loan book is still getting worse. Every time NAMA lifts a stone at Anglo its seems more maggots crawl out. The Central Bank is now projecting that up to 70pc of the remaining €20bn of bad loans that Anglo is transferring to NAMA will have to be written off.

And Brian Lenihan is still determined that most of Anglo's bondholders will not shoulder any of the cost of bailing out this rotten bank. While Anglo's subordinated bondholders are likely to endure a severe "haircut" on their €2.4bn of bonds, Anglo's senior bondholders, who are owed more than €14bn, look set to escape scot-free.

While €10bn of the senior bonds were issued after the Government issued the deposit guarantee and are thus explicitly guaranteed by the state, €4bn of them were issued before the bank guarantee was issued two years ago. Taxpayers will surely feel that these bondholders were consenting adults who knew what they were letting themselves in for.