The cost of bailing out the crippled lender saddled Ireland with the biggest budget deficit in the European Union last year, undermining a government austerity drive, and lingering uncertainty over the size of the final bill has spooked markets.
Anglo Irish Chief Executive Mike Aynsley told Reuters on Tuesday that a figure of 25 billion euros was broadly correct. “You heard Mike Aynsley yesterday putting a figure of 25 billion with a caveat relating to NAMA,” said Martin Mansergh, a junior minister in the finance ministry, referring to the National Asset Management Agency (NAMA), the state bad bank scheme in which Anglo is the biggest participant.
In an analysis criticized by Dublin and accompanied by a ratings cut, agency Standard & Poor’s estimated last week that the final cost of purging Anglo Irish of the bad debts it accumulated during the property boom could hit 35 billion euro. As they faced pressure on Tuesday to shut down the lender completely, ministers refused to be drawn on the amount Anglo Irish would need. Finance Minister Brian Lenihan said clarity on the total cost would come when Ireland reaches an agreement with the European Commission on what to do with the lender.
Mansergh, the first minister to comment on the figure, said the 25 billion euro figure had to be seen in the context of Ireland’s wider fiscal problems. “That is a bit more than one year’s budget deficit or borrowing,” Mansergh told Newstalk radio. “I would still see, and I think the government would see the borrowing, the gap between government expenditure and revenue as a much bigger problem than the banking problem,” he also said. Anglo Irish has to transfer a further 20 billion euros to NAMA and Aynsley said he expected it to be sold at a discount to its par value of 60-65 percent, matching a near-62 percent discount on the last tranche of loans sold.
In comments published in Wednesday’s Irish Times newspaper, Aynsley again made clear the 25 billion euro amount could rise if the NAMA discount exceeded 65 percent or in the event of an unexpected economic shock. “We feel reasonably confident that this would be enough in the absence of a further downturn in the property market or anything particular happening around a large customer that we don’t expect,” Aynsley said. Anglo Irish was at the top of the agenda as Prime Minister Brian Cowen convened his cabinet on Wednesday for the first time after the summer break, with his coalition allies the Green Party calling for a wind-down of the bank. The whole purpose of how we are dealing with these issues from the beginning has been how do we minimise exposure to the taxpayer, we’ve outlined that very clearly,” Cowen said on his way into the meeting.
