From World Socialist Web Site: http://www.wsws.org/articles/2010/oct2010/irel-o04.shtml
By Steve James
4 October 2010
The Irish government’s September 30 emergency bailout is intended to draw a line under the country’s deepening financial crisis. The government claims to have enough liquid cash to continue functioning until sometime in 2011, but the continual injection of massive state funding into ruined banks, particularly Anglo Irish Bank, risks national bankruptcy. Such an event would likely have a catastrophic chain reaction across Europe.
Since August, when Standard & Poor’s downgraded the government’s credit rating, Ireland has again become the centre of doom-laden international commentary on the state of its banks. Indicating the extent of alarm is the fact that the yield, interest rate, on Irish 10-year government bonds is now higher than that faced by the Greek government prior to the €110 billion bailout by the European Union (EU) in May 2010. A number of hedge funds were reported to be taking positions based on a likely Irish default. All the Irish banks are heavily reliant on temporary “non-standard” funding from the European Central Bank (ECB).
Finance Minister Brian Lenihan’s latest measures remain vague. Anglo Irish, nationalised in early 2009 to save it from collapse, will require a total of €29.3 billion from the state. Yet if property prices do not perform as expected, that could rise to €34.3 billion. €22.9 billion has already been committed, so this is an increase of at least €6.4 billion.
Allied Irish Bank (AIB), which needs to raise €7.4 billion before the end of the year, will be given an additional €3.5 billion, on top of €3 billion handed over last year. The bank is also likely to be taken under majority state control, since it will face difficulty raising cash from asset sales and external sources. AIB has been undermined by the unexpectedly high discount imposed on bad loans handed over to the state “bad bank”, the National Asset Management Agency (NAMA).
Continue reading: http://www.wsws.org/articles/2010/oct2010/irel-o04.shtml