Ireland May Seek to Transfer Allied Irish Rescue Cost to EU
October 18, 2011, 12:48 PM EDTBy Joe Brennan and Dara Doyle
(Updates with Kenny’s comments in seventh paragraph.)
Oct. 18 (Bloomberg) -- Ireland may try to transfer part of the 62 billion-euro ($85 billion) cost of bailing out its banks to the euro-region’s rescue fund should policy makers allow the facility to buy stakes directly in lenders, three people with knowledge of the matter said.
The state may seek to recoup a portion of the 20.7 billion euros it spent bailing out Allied Irish Banks Plc from the European Financial Stability Facility, said two of the people, who declined to be identified because no decision has been made. Finance Minister Michael Noonan has indicated he may use the EFSF to replace some of the 29 billion euros the government provided Anglo Irish Bank Corp., the first to be nationalized.
Three years after guaranteeing its banks, a decision that forced Ireland to seek an international bailout last year, officials want the country to benefit retroactively if EU policy makers expand the EFSF’s remit to invest directly in banks. Noonan has said Irish banks don’t require additional capital.
“The aim seems to be to put the fund to use for European banks that need fresh capital,” said Colm Ryan, head of fixed income at Goodbody Stockbrokers in Dublin. “Ireland may be able to refinance” Anglo Irish, he said. “Given Ireland has already recapitalized its banks, I don’t think it would be so easy to tap the fund to replace capital that has already gone into other banks.”
The International Monetary Fund said Sept. 7 it estimates Ireland’s general government debt will peak at 118 percent of gross domestic product in 2013, equivalent to almost 200 billion euros. That’s up from 25 percent of GDP in 2007.
‘In the Game Retrospectively’
A Finance Ministry spokesman said yesterday Ireland is “considering all options.” Noonan said on Oct. 6 he has been “positioning a renegotiation of the costs” of bailing out Anglo Irish. Still, there have been no talks on whether “we can get back in the game retrospectively,” he said.
Prime Minister Enda Kenny said today the country is “constantly” seeking to move the “agenda” to achieve a reduction in the country’s debt burden.
“I don’t want to see a situation where an opportunity is lost to reduce the debt burden,” Kenny said in the Irish parliament in Dublin today. Kenny said that he wants to make sure that any measures reached at the Oct. 23 summit of European leaders are “fair across the board.”
Ireland injected 46 billion euros into its banks before receiving 85 billion euros in a bailout led by the International Monetary Fund and European Union last year. The state then injected a further 16.5 billion euros into the banks, about the same as the amount the government was required to put up to receive the bailout.
“There is no sign yet that there will be a softer deal anywhere else with the exception of Greece whose banking system is in much difficulty,” Noonan said on Oct. 6 in Ireland’s upper house of parliament.
--With assistance from Finbarr Flynn in Dublin. Editors: Edward Evans, Stephen Taylor.
To contact the reporter on this story: Joe Brennan in Dublin at jbrennan29@bloomberg.net
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net
