Belfast Telegraph

Bank collapses will mean tax hikes

Irish workers are bracing themselves for painful tax hikes after reckless bankers left a 40 billion euro hole in the public purse.

Taoiseach Brian Cowen gave his strongest indication that extra levies would be included in December's widely-feared slash-and-burn Budget.

With the final bill for Anglo Irish Bank possibly reaching up to 34 billion euro, the Government is preparing to chop "significantly" more than 3 billion euro from public services, such as health, education and social welfare.

And in a stark warning to taxpayers, Mr Cowen said the draconian cuts alone would not be enough to plug the massive gap in the State finances.

"Obviously there will have to be revenue raising as a contribution to closing that gap - it cannot all be done on the expenditure side," he said.

In a further sign of the severity of the crisis, Mr Cowen signalled the very sovereignty of the country was at stake. "This is not going to be easy but it has to be done," he said. "Why does it have to be done? Because we as a country want to control our own affairs."

The Central Bank has estimated Anglo Irish Bank will saddle taxpayers with debts of 29.3 billion euro or up 34.3 billion euro in a worst case scenario.

The relatively small rogue lender Irish Nationwide, which has also been brought under public control, will cost the public 5.4 billion euro.

Governor Patrick Honohan admitted that 40 billion euro of the bailouts were "essentially lost money". But the country's chief banker insisted billions pumped into Allied Irish Bank (AIB) - which would now be effectively state-owned after requesting another 3 billion euro - was an investment that could be recouped.

The total bill for the bailout - running to 50 billion euro - is expected to bring Ireland's deficit to a massive 32% of the value of the economy, or Gross Domestic Product, this year.

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