Belfast Telegraph

Monday 22 September 2014

Ireland to take control of banks as fears deepen

Irish prime minister Brian Cowen announces the National Recovery Plan at the Government Press Centre in Dublin

Urgent action to keep the Republic's banks afloat will be taken within 72 hours. The current crisis will force the Irish government to inject hundreds of millions in new capital into the banks, leaving the state with majority ownership -- effectively nationalising AIB and Bank of Ireland.

The current crisis will force the Irish government to inject hundreds of millions in new capital into the banks, leaving the state with majority ownership -- effectively nationalising AIB and Bank of Ireland. The drastic measures were seen as inevitable following a plunge in shares, negative market reaction to the bailout and a deepening crisis for the euro.

High-level talks were continuing last night about pumping extra cash into the banks before the weekend.

Shares in AIB have plunged 73pc so far this year. That means investors value the entire bank, including all its branches and deposits, at just €357m. At its peak, it was valued at around €22bn. Shares in the bank closed at just 33c last night -- a long way from their peak of €23.95 in February 2007.

Bank of Ireland's share price tumbled to a record low of 25c before closing at 30c last night. That means its value was €1.59bn -- less than a tenth of its value in the boom.

News of the urgent new action over the banks came as embattled Taoiseach Brian Cowen faced the wrath of his TDs last night, and as the Republic of Ireland was accused of jeopardising the very future of the euro.

After another day of deep political uncertainty in Dublin, the markets reacted badly to the State's economic and political crisis.

In Greece, the government was told it would get the next part of its €110bn bailout package on time, but it was warned by the IMF it must make extra efforts to meet next year's deficit targets.

Spain's borrowing costs jumped yesterday as the jitters over Ireland spread, prompting investors to ignore Madrid's progress towards meeting its deficit targets.

Last night, Mr Cowen listened to about four hours of debate among ministers and backbench Fianna Fail TDs at a parliamentary party meeting.

At the closed-door meeting the Taoiseach made a passionate address in which he made it clear he would stay on as leader of Fianna Fail and would not be quitting before an election -- as demanded by some party rebels.

Some TDs laid the blame for the party's woes and the growing political vacuum at Mr Cowen's door.

Veteran TD Mary O'Rourke urged members to "throw their hats in the ring" in January. Serial rebels, including former junior minister John McGuinness and TD Maire Hoctor, called on Mr Cowen to go after the budget on December 7.

The meeting came as the ripple effects of Ireland's turbulent €90bn bailout and escalating political crisis continued to reverberate across Europe.

The Irish government's four-year plan, including slashing €1bn off the public sector pay bill, will be published today as European Finance Commissioner Ollie Rehn starkly warned Ireland it must ensure the budget is passed.

He said: "Every day that is lost increases uncertainty and increases the economic and social cost. So please let's adopt the budget, let's get it out of the way and let's move on."

The budget deadline is a key proviso in talks with the European Community and International Monetary Fund (IMF) to ease the risk of the crisis spreading to economically weak euro countries such as Portugal and Spain.

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