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State aid to Anglo Irish Bank set to exceed €24bn; Bank support pushed Irish budget deficit to 36.51% of GDP in Q1 2010
By Finfacts Team
Aug 11, 2010 - 7:21:27 AM
The European Commission revealed on Tuesday that State aid
to be provided to Anglo Irish Bank is
set to exceed €24bn as a result of higher than expected discounts being
applied to loans the State-owned bank is transferring to the National Asset
Management Agency (NAMA). Eurostat, the EU statistics office's
database shows that the Irish budget deficit hit 36.51% of GDP (gross domestic
product) in Q1 2010 as a result of bank funding support.
The
European Commission announced its approval for the Government to
provide up to €10.054bn in temporary emergency State aid
to Anglo Irish Bank on top of the €14.3b that has been
approved to date. The total includes an additional €1.4bn sought by the
Government recently to allow Anglo meet its regulatory capital
requirements following the steeper discounts on
transferring loans to NAMA.
Commission Vice-President for Competition
Joaquín Almunia said: "Anglo
Irish Bank needs a third emergency recapitalisation to meet its obligations. The
measure is necessary to preserve financial stability in Ireland. However, there
is no doubt that 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 found that the recapitalisation is
indispensable to remedy Anglo Irish Bank's financial difficulties and maintain
confidence in the Irish financial markets. Therefore, the
Commission temporarily authorised emergency aid until it has reached a
final decision on Anglo Irish Bank's restructuring plan, which was submitted by
the Irish authorities on May 31, 2010. Discussions on the restructuring plan are
currently ongoing.
Karl Whelan, professor of economics at UCD,
brought attention on the Irish Economy blog last weekend, to the huge rise in the Irish budget deficit in the first
quarter of 2010 to 36.51%, as a result of bank support.
Eurostat, the EU's statistics office has updated
its database with government finance data for Q1 and it has rejected the
classification of the State support for Anglo as an investment.
In effect, it is likely to be a huge loss to the
taxpayer.
