Happier days!

The European Commission today gave approval for the Irish Government to inject funds into Anglo Irish Bank and Irish Nationwide, but it has also begun an in-depth investigation into the total aid received so far by Anglo. New restructuring plans have to be submitted by June.

The Commission said it had backed recapitalisation worth up to €10.4 billion for Anglo and €2.7 billion for Irish Nationwide as emergency measures and to help preserve financial stability in Ireland. The approval is valid until June 22nd. The EU had already approved €4 billion for Anglo last year.

Commission Vice-President for Competition Joaquin Almunia said: "There is no doubt that both Anglo Irish Bank and INBS need a significant recapitalisation to meet their obligations. The measures are also necessary to preserve financial stability in Ireland. However, INBS needs to establish a viable restructuring plan and Anglo Irish Bank has to restructure profoundly in a way that effectively tackles the weaknesses of the past business model and ensures a sustainable future without continued State support."

The Commission said earlier this year, Ireland notified a capital injection of €8.3 billion in favour of Anglo Irish Bank, one of Ireland's largest banks, to be paid in successive tranches over 10 years. This will cover the capital needs of the bank as of end March 2010. For the future, as a contingency the Irish authorities furthermore notified a potential €2.14 billion increase in the recapitalisation, thus leading to a maximum amount of €10.44 billion for Anglo. This increase of the aid amount can be granted under strict conditions if the price paid by the National Asset Management Agency (NAMA) for the first tranche of loans is below estimates (i.e. in case the so-called "haircut" exceeds estimates).

The Commission noted that the Irish authorities also sought approval under the Commission Communication on the recapitalisation of financial institutions in the current financial crisis for a €2.7 billion capital injection into INBS, a building society.